Chase to Pay $100M to Settle Interest Rate Increase Allegations

SAN FRANCISCO - (Mealey's) Chase Bank USA NA yesterday agreed to pay $100 million to settle claims that it increased interest rates on loan balances that were transferred to consumers' credit cards after it allegedly promised them a fixed rate, according to a settlement document the plaintiffs filed in the multidistrict litigation in a California federal court (In Re:  Chase Bank USA, N.A. "Check Loan" Contract Litigation, No. 09-md-02032, N.D. Calif.).

The motion for approval of class settlement is subject to the approval of U.S. Judge Maxine M. Chesney of the Northern District of California.

'Excellent' Result

Consumers filed 14 separate class action complaints in various federal district courts, alleging that Chase violated the Truth in Lending Act, breached its contract with the consumers and committed a breach of implied covenant of good faith and fair dealing regarding its offer to transfer loan balances the consumers held with other lenders to their Chase credit card accounts in exchange for Chase's offer to consolidate the debt into a "fixed, long-term loan." 

Specifically, the consumers contended that the defendants are now attempting to coerce them out of the loans by "increasing the minimum monthly payment from 2% of the loan balance to 5% of the loan balance."  On June 26, 2009, the Judicial Panel on Multidistrict Litigation consolidated the actions in the Northern District of California for pretrial proceedings.  The consumers then filed a master complaint, making the same allegations against the defendants.

In May 2011, the District Court certified a class made up of people or entities who entered into a loan agreement with Chase and were promised a fixed annual percentage rate until the loan balance was paid in full and whose rates were raised from 2 to 5 percent.  The District Court previously granted dismissal of all claims except one for a violation of the implied covenant of good faith and fair dealing.  The settlement would avoid a trial, which was set to begin this month.

In the motion for approval of class settlement, the plaintiffs called the settlement amount an "excellent" result and said it represents approximately half of the up-front transaction fees the class members originally paid for certain promotional credit card loans.

Attorneys

The class is represented by Elizabeth J. Cabraser, Michael W. Sobol and Roger N. Heller of Lieff Cabraser Heimann & Bernstein in San Francisco; Burton Falk and Drew E. Pomerance Roxborough Pomerance Nye & Adreani in Woodland Hills, Calif.; Robert S. Green of Green & Noblin in Larkspur, Calif.; and Barry R. Himmelstein of Himmelstein Law Network in Emeryville, Calif.

Chase is represented by Alexandria R. Kachadoorian, David W. Moon, Julia B. Strickland, Stephen J. Newman and Joseph A. Escarez of Stroock & Stroock & Lavan in Los Angeles.

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