The Latest Move by Chase Contradicts Testimony

Chase Bank (JPM) is delivering a huge blow to its most creditworthy (i.e. least irresponsible) subset of cardholding customers by changing repayment terms in an unethical fashion. This action also stands in direct contrast to Chase’s official testimony (to the U.S. Senate Committee on Banking, Housing and Urban Affairs) about providing “opt out” options when making policy changes.

Resisting the urge to hit people already down by asking why it is they racked up debt in the first place, consider asking these questions first:

• Were they paying it back?
• Can they prove a history of timely payments?
• Can they demonstrate a track record of over overpaying to reduce the principal?

If the answers come as a resounding yes to each question shouted by ~850,000 consumers in unison, then consider asking why Chase Bank should rock this boat?

Chase determined that “the total number of (these) customers (are) relatively low, but the balances that these customers carry amount to billions of unsecured debt”.

Great job Chase… way to solve the case!

Currently ~850,000 people who have been making timely payments and overpayments for years have received notices that their minimum payments are being increased from 2% to 5%.

This may not seem like much, but to a consumer or small business owner struggling to pay off a $30k balance… the $600 monthly payment just increased to $1,500…

And a $60k balance with a $1,200 monthly payment just increased to $3,000.

Chase heavily solicited these consumers, and aggregated many more by buying up competing lenders too. They posted record earnings while lending out money at 3.99%. Then the realization hit home that they mismanaged the rest of their portfolio. Then they took bailout money resulting in tax increases that will likely hit these same consumers the hardest. Now they turn on their most loyal producers in a desperate attempt to make up losses.

Chase is effectively calling back loans they made to folks who paid a premium to receive favorable terms (similar to buying down the rate of a mortgage by paying a point), via balance transfer fees, and by the opportunity cost of forgoing a zero percent introductory rate for as many as 12 months.

The intention is clear:

Accelerate repayment of balances that were misleadingly, if not falsely, solicited as “life of loan” terms, and trigger usurious rate hikes on the resulting defaults.

Unlike bailouts for banks, car companies, and loan modifications, etc., there is not a single web message posted from any consumer affected by this, who did not communicate their history of unwavering determination to pay back their obligation.

Meantime, as an auto-reply to complaints filed by California-based consumers, Senator Barbara Boxer dismisses the matter as solved, by relating how she was “proud to work for passage of H.R.627, the Credit Cardholders' Bill of Rights Act”. Her insipid self-congratulation is especially ironic, because it is this very legislation that has pushed companies like Chase to redistribute their usurious practices from non-performers onto those consumers who still have credit profiles left to defend.

So now the credit card industry officially joins healthcare, mortgage, and taxation as the most recent failed attempt to subsidize losses… you know… the new standard: squeeze the few producers still standing to shoulder the burden of the ever-growing masses who do not.

This last straw may break many of the 850,000 backs, which in turn, will create a further drain on the system.

So at the next cocktail party, when someone launches into the whole “problem today with the welfare-disability-loan-modification-unemployment-benefit-receiving-populous” discourse… consider mustering your most sarcastic reply… that it officially does not pay to produce.

Disclosures: None.

Comments

[ChaseVictim:]

Good report and 100% true about Chase. One of my Senators also replied back to my complaint in regards to what Chase is up to about how proud he was of the Credit Card Reform Act of 2009. My other Senator and my House Represenative didn't even bother to auto-reply. After I pay off my balances with Chase at their 5% minimum monthly payment, I will never set foot in a Chase Bank or utilize a credit card from them again. Note: I did hear of some of the Chase "victims" that were told that they could keep the 2% minimum monthly payment, provided they agreed to adjust the interest rate to a much higher one. Sounds a little like extortion to me! Even worse, the majority of Congress as well as the President doesn't even appear to give a damn about what the credit card companies are doing right now. While we may have been getting screwed by the credit card companies under the previous administration, we're getting raped under the current one.

Jul 10 07:45 PM

[Mark54:]

Don't you get it? JP want out of this business fast... They are alienating all borrowers to minimize exposure. In a way its genius.. most firms would sell the business at a steep discount. They are simply keeping the infrastructure and shrinking the business by un-orthodox means.

Jul 10 09:22 PM

[michaelsass:]

I own a condo and have an outstanding balance of $140k, consisting of $104k primary and $36k secondary. I took the home equity to consolidate debts. At the time the property was valued at $163k but now it is valued at $134k. I'm looking to sell because i am engaged and will be moving into my fiancee's home. Check obamamortgage2009.blog... If I have a buyer who offers me within say $5-7k of the outstanding, can i agree to assume a loan on the residual and pay the bank the difference over time with interest? The same bank holds both mortgages.

Jul 11 02:37 AM

[fredboyd:]

Hear, hear!

The smart bankers are not figuring out ways to continue to soak the average American to further their own bailout. I have paid my balances down to reduce my "utilization of credit" ding on my credit report, the banks then reduce my credit lines, putting me back in the same bad utilization of credit situation, then they raise the interest rates on the cards, the minimum monthly payments and I'm in a worse position than I was with higher credit card balances. This will push me to eliminate all credit card debt, which will reduce my consumption ability, which will slow the economic recovery, which will slow the recovery of my small business. This is the view from entrepreneurial, small business America!

Jul 11 11:37 AM

[fredboyd:]

Hear, hear!

The smart bankers are figuring out ways to continue to soak the average American to further their own bailouts and personal gains. Americans should expect all businesses to be good corporate citizens- that means operating their businesses in a way that makes America a better place, not just making token contributions to their charities of choice!

I have paid my balances down to reduce my "utilization of credit" ding on my credit report, the banks then reduce my credit lines, putting me back in the same bad utilization of credit situation, then they raise the interest rates on the cards, the minimum monthly payments and I'm in a worse position than I was with higher credit card balances. This will push me to eliminate all credit card debt, which will reduce my consumption ability, which will slow the economic recovery, which will slow the recovery of my small business. This is the view from entrepreneurial, small business America!

Jul 11 11:40 AM

[misterchan:]

Lots of applause for your accurate portrayal of Chase. Hopefully you will continue writing on this deplorable subject. Because voices such as yours are the gateway to change.

Jul 13 12:32 AM