You are hereChase Cards Regroups on Change of Terms
Chase Cards Regroups on Change of Terms
Late last year, Chase's credit card division decided to change the terms on accounts where customers had taken advantage of low-rate loans which were to be paid back over "the life of the balance".
Now credit card issuers change terms all the time. The reason these changes stood out because it took accounts with existing promotional balances in good standing and imposed two new conditions on them:
1. a $10 monthly "finance charges" on the cards, whether open or closed; and
2. an increase in monthly minimum payments due from 2% to 5% of the remaining balance.
These changes unleashed a firestorm of criticism. To date, at least twelve class-action lawsuits have been filed against Chase over this action. Dr. Robert Lahm, who was himself affected by the change in terms, has done a thorough job tracking these lawsuits and related developments at the site he devoted to this issue, http://www.changeinterms.com/ .
Well today, Chase announced that they would be rescinding the $10 "finance charge", but not the increase in minimum payments.
This was a shrewd tatical move on Chase's part. They now can now better advance their claim that they are "helping" these cardmembers pay down their balances, since newly imposed montly fees won't be uncutting that argument. More important, they leave themselves in a better legal position. Several of the class actions turn on the claim that in imposing this "finance charge" on prior balances subject to a "fixed rate", Chase is violating Truth in Lending and related statutes.
It's crucial to emphasize here that this new "finance charge" was always of secondary importance to Chase. What drove the change in terms was Chase's desire to get unprofitable loans off their books in light of two new factors. Those are first, the collapse of the marked for securitized credit card debt; and second, the increased default rates by credit card customers as a result of the larger economic downturn. These two factors make carrying customer debt much more costly for Chase than it was at the time they extended the promotional rates. Thus Chase's main prize here is getting that low-rate financing paid off. Extra revenue from newly imposed "finance charges" is simply trivial by comparison.
Chase's retracted "finance charges" have already advanced their primary objective even after being reversed in full. Many cardmembers opted to pay off their Chase debts first, as soon as they realized that if they did not, this new finance charge would put them further in the hole with each passing month? We'll never know. I can say that I've been personlly contacted by several people who felt they had no choice but to pay off Chase first, among all their debtors. While they will get up to $30 in new fees credited back, Chase is not offering to reinstate the low-rate loans these customers were opting to carry prior to being hit with the fee change.
We'll be watching this issue closely going forward. We would appreciate any feedback you may have. Please write to us at chase dot rethinkingmoney dot com . We'd especially appreciate hearing from any of you who have been affected by this change of terms living in Washington State. Thank you!