Consumer Groups Call on Chase Bank to End Minimum Payment Hikes on Fixed Rate Credit Cards

For Immediate Release

Consumers Union
Contact: 

Gail Hillebrand or Michael McCauley – 415-431-6747

Consumer Groups Call on Chase Bank to End Minimum Payment Hikes on Fixed Rate Credit Cards

Chase Policy is Putting Many Customers at Risk of Default or Forcing Them to Accept Higher Interest Rates

WASHINGTON -  Consumers Union, National Consumer Law Center, and USPIRG called on
Chase bank to stop hiking minimum payments on credit card customers
with fixed interest rates in response to numerous complaints from
consumers about the practice. Over the past year, Chase has been
notifying many of its customers that their minimum payments would
increase from 2% to 5% of their balance. Customers can keep their
minimum payment at 2% only if they agree to forgo the low promotional
interest rate they signed up for and accept a doubled interest rate.

In their letter to Chase, the groups note: “While over the long term
higher minimum payments can reduce debt faster, the sharp rise in
minimum payments can throw a family budget into disarray, especially
during a recession. The real effect of these sharp increases in minimum
payments is to force customers who can’t face a more then doubled
minimum payment to give up their favorable fixed promotional rate. This
sharp increase will also force many consumers to default into penalty
interest rates which will keep them indebted for longer.”

A complete copy of the consumer group letter to Chase is found below:

September 8, 2009

Gordon A. Smith
CEO Card Services
J.P. Morgan Chase & Co.
270 Park Avenue
New York, NY 10017
Re: Minimum payment increases
Dear Mr. Smith:

During the last twelve months Chase bank has twice notified many of
its customers that their minimum payments would increase from 2% to 5%
of their balance. Consumers Union has received complaints from more
than 100 of these Chase customers, all of whom describe the following
similar set of facts:

  • These customers held balances subject to “fixed interest
    rate for the life of the loan” promotions offered by Chase through
    balance transfer and convenience check solicitations.
  • They used Chase’s promotional offer for large loans in reliance upon the terms of the promotion.
    The consumers were not late in making payments.
  • Most paid more than the minimum payment each month.
  • The minimum payment was raised so that it included 5% of the balance (up from 2%)
  • When contacted about the increase, Chase told the consumers that
    the minimum payment could be brought back down to the prior 2% level
    only if the consumer agreed to forgo the promised promotional interest
    rate and instead accept a doubled interest rate.
  • Chase’s change in repayment terms raised credit card payments to
    250% of the old payment. While over the long term higher minimum
    payments can reduce debt faster, the sharp rise in minimum payments can
    throw a family budget into disarray, especially during a recession. The
    real effect of these sharp increases in minimum payments is to force
    customers who can’t face a more than doubled minimum payment to give up
    their favorable fixed promotional rate. This sharp increase will also
    force many consumers to default into penalty interest rates which will
    keep them indebted for longer.

    Here are just two Chase customers who have shared with Consumers
    Union the impact this increase has had on their financial situations:

    Tom from California told Consumers Union about his experience with
    Chase. He reports that he has been using his two Chase credit cards to
    help support his small business.  He acquired the second card when
    Chase was offering a promotional balance transfer.  As a consumer with
    a perfect credit record, he was shocked to receive a notice indicating
    his minimum payment on his balance transfer was increasing from 2% to
    5% starting September 2009.  His monthly payments will now go from $475
    to $1200.  As a self employed small business owner, he is having a hard
    time thinking about how he will pay more than twice as much to Chase
    each month and still turn over a profit to keep his business going. 

    Earl from Maryland told Consumers Union that he took advantage of a
    promotional balance transfer offered by Chase bank to help pay for his
    daughter’s college tuition.  With a lower interest rate and 2% minimum
    payment requirement, it seemed to him to be a valid financial
    decision.  Then Chase upped Earl’s minimum payment to 5% of the
    balance.  Carrying a $50,000 balance from tuition costs, Earl says he
    won’t be able to pay off the balance at that rate and will most likely
    default.   

    We ask Chase for the following:

  • Refrain from increasing consumers’ minimum payments, with respect to balances subject to promotional fixed interest rates.
  • Restore the minimum payment for those consumers who have been
    affected by this change in terms, to the level in place at the time the
    consumer incurred the promotional balance.
  • Restore the promotional “life of the balance” interest rates for
    those consumers who gave theirs up for the sake of a manageable monthly
    payment.
  • By changing the terms of these promotional financial products Chase
    is significantly harming the economic stability of the families who
    make up its consumer base. We ask that Chase reconsider this
    devastating change in terms.

    Sincerely,

    Consumers Union
    National Consumer Law Center
    USPIRG

    Gail Hillebrand or Michael McCauley – 415-431-6747

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