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
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,
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.
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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