New York’s Attorney General is claiming credit for forcing Chase Card Services to back down from a controversial $10-a-month maintenance fee, although a Chase spokeswoman denied a connection between rescinding the fee and the AG’s efforts.
Industry observers say the real reason for dumping the $10 fee may be a combination of legal, political and regulatory factors.
“Although the fee was permissible, Chase decided to cease the assessment of the fee in response to card member feedback and will refund approximately $3.3 million in assessed fees on card members’ April statements,” Stephanie Jacobson, vice president of public affairs for Chase, wrote in an e-mailed statement sent Monday.
Jacobson told reporters last week Chase was nixing the fee, but would continue to require minimum payments of 5 percent of the outstanding balance on accounts — rather than the previous 2 percent. Cardholders were notified of the changes in November and the fees took effect in January on 184,000 accounts. Asked the reason for backing away from the fee, Jacobson cited “customer feedback.”
However, on Monday, New York AG Andrew Cuomo’s office issued a press release stating: “Upon meeting with Chase, the office demanded that Chase cancel the $10 monthly service charges and refund all those that it had collected. On March 26, Chase agreed to comply with the Attorney General’s demand.”
According to the AG: “My office will not sit back and allow banks to promise one thing in its solicitations and agreements with consumers, and then when times get tough, change the deal, leaving consumers holding the bag. Truth-in-lending laws prohibit this very conduct. I am glad that Chase has now reconsidered its ill-advised, illegal decision, and will now live up to the terms it originally offered and agreed to.”
Cuomo and Chase disagree on more than just what prompted the fee. The AG’s office says the amount to be refunded to consumers is $4.4 million while Jacobson confirmed Chase will credit $3.3 million to the affected accounts.
What’s the real reason?
Industry observers say Chase may have gotten heat from a number of sources and discontinued the fee. Negative publicity about the charges bubbled up at a time when Congress and President Barack Obama are focusing more attention on the operations of banks receiving billions in federal taxpayer bailout funds. In addition, numerous lawsuits have been filed across the country by consumers seeking to start a class-action suit against the credit card issuer for changing the terms of the low-interest loans they received.
Federal regulators also have leveled more scrutiny at credit card issuers and their practices amid Congressional debate over several pending bills to curb unfair or deceptive credit card practices. The two most prominent bills — the Credit Cardholders’ Bill of Rights in the U.S. House of Representatives and the Credit CARD Act in the U.S. Senate — are on the agenda for discussion and possible action this week.
Chase is one of several major credit card issuers that has added fees, cut credit limits, raised interest rates and changed terms as they struggle to manage riskier cardholder accounts.
According to Jacobson, the affected accounts represented “less than one half of 1 percent” of Chase’s card portfolio. It included cardholders who took advantage of Chase’s low-interest introductory card offers, but who had “made little progress in paying down these loans. Our desire is to have these loans repaid in a reasonable period of time,” she indicated.
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