Did Chase pull a credit card bait and switch?

“Most of these loans have been paid back in less than 24 months. However, there have been a small percentage of customers that have made little progress in paying down these loans. Our desire is to have these loans repaid in a reasonable period of time.”

Gayle Orner of Corvallis, Ore., doesn’t buy the bank’s explanation. Orner tells me she paid off more than 40 percent of her $25,000 balance over two years. And yet, in January her minimum payment jumped from $300 to $500 a month. “That’s a lot to stomach,” she says.

Orner, a medical researcher at Oregon State University, called Chase before accepting their balance transfer offer and asked what was required to insure the rate would not change. “And they said, ‘as long as you make the payments on time and don’t go over the credit limit, that rate is the rate you will have for the life of the loan.’ Period. No exceptions.”

Rather than switch banks, Orner decided to see if she could handle the higher minimum payments. “It puts me right on the edge to be able to survive month to month,” she tells me. Orner worries she could lose her job this summer. “Not being able to put any money into savings really hurts right now.”

Chase agrees to refund millions
Just last week, under pressure from the New York attorney general’s office, Chase agreed to end the $10 monthly fee and credit the service charges already billed. The bank says it will refund $3.3 million to approximately 300,000 customers.

Attorney General Andrew Cuomo told Chase the $10 a month fee significantly raised the interest rate on these accounts, something he says is prohibited by truth-in-lending laws. Cuomo said the settlement will save cardholders about $22 million dollars during the next 12 months.

The lawyers suing Chase say the bank needs to do more – reset the minimum payment back to 2 percent and reimburse all the customers who were promised a low interest rate (2.99 percent, 3.99 percent or 4.99 percent) and agreed to accept a 7.99 percent interest rate in order to avoid the new monthly service charge and bigger monthly payments.

My two cents
A judge or jury will ultimately decide if Chase violated any laws. Clearly, Attorney General Cuomo believes the bank did.

I have a copy of the solicitation letter Chase sent its customers and it’s very simple and perfectly clear. The bank will not raise the interest rate “for the life of the balance” as long as you are in good standing.

In my book, a deal is a deal, especially when it’s in writing. And you can’t weasel out of it just because you want to make more money.

New rules from the Federal Reserve which go into effect in July of 2010 will prohibit credit card companies from changing terms at any time and for any reason. This case demonstrates why those rules are needed and why Congress should get moving on the Credit Cardholders Bill of Rights to give all of us with a credit card the protection we need sooner than next summer.

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