July 24 (Reuters) - JPMorgan Chase & Co has agreed to pay
$100 million to settle litigation by credit card customers who
accused the largest U.S. bank of improperly boosting their
minimum payments as a means to generate higher fees.
The class action settlement resolves a three-year-old case
stemming from Chase's decision in late 2008 and 2009 to boost
minimum monthly payments for thousands of cardholders to 5
percent of account balances from 2 percent.
It comes as JPMorgan, like many of its main rivals,
addresses a wide range of litigation over its banking practices,
such as whether it conspired to overcharge retailers on card
transactions, or manipulated benchmark interest rates.
Cardholders claimed that JPMorgan had induced them to
transfer balances from other lenders to Chase card accounts,
where the bank would consolidate their debt into loans with
"fixed" interest rates until balances were paid off.
But according to the cardholders, JPMorgan boosted minimum
payments to force them to either accept higher rates to preserve
the lower payment requirement, or to make more late payments,
which would trigger more fees or a 29.99 percent penalty
interest rate. JPMorgan was also accused of closing
In a Monday filing with the federal court in San Francisco,
lawyers for the cardholders said the $100 million is 45 percent
of the $220 million in up-front transaction fees that their
clients paid for the promotional loans.
They called the settlement an "excellent result" for
cardholders, who would recover "a substantial portion of the
transaction fees they paid."
Legal fees would not exceed 27 percent of the settlement
fund, the filing said.
JPMorgan spokesman Paul Hartwick declined to comment. The
bank had argued that the changes in loan terms was a sensible
means to reduce risk amid uncertain economic conditions.
Based in New York, JPMorgan is among the lenders that on
July 13 agreed, along with Visa Inc and MasterCard Inc, to pay
$6 billion to settle retailers' claims that they engaged in
anticompetitive practices to fix fees for processing credit and
debit card payments.
Regulators are also examining whether JPMorgan and more than
one dozen rivals have tried to rig the London interbank offered
rate, known as Libor, and other key rates underpinning hundreds
of trillions of dollars in assets.
The credit card settlement requires approval by U.S.
District Judge Maxine Chesney. A hearing to consider preliminary
approval is scheduled for Aug. 3.
In midday trading, JPMorgan shares were down 10 cents at
$34.34 on the New York Stock Exchange.
The case is In re: Chase Bank USA NA "Check Loan" Contract
Litigation, U.S. District Court, Northern District of
California, No. 09-md-02032.
For Chase Bank: Alexandria Kacjadoorian, David Moon, Julia
Strickland, Stephen Newman and Joseph Escarez of Stroock Stroock
(Reporting by Jonathan Stempel)
Follow us on Twitter @ReutersLegal | Like us on Facebook