Sorry, I stole the title from this chase-sucks.com post because I couldn’t think of a more appropriate one.
Basically, the story is that a Chase customer has a loan to which they decide to start making extra principal payments to, and do so according to the procedure set by Chase. But instead of applying the payments to principal, which would reduce the loan balance, Chase decides that the extra money is to pay interest payments ahead of schedule.
It’s official, Chase has no morals.
Apparently Chase has decided attempting to get people to sign up for overdraft protection for their debit cards, which they will be required to do soon (i.e. opt-in only), using fear isn’t quite getting them the response they want, so they are switching to bait-and switch.
According to this article, Chase is sending out overdraft letters in two stages. The first is the come-on and doesn’t contain any of the negative details, which are the high fees you pay if you overdraft by even one penny. The follow-up letter, presumably in much smaller type, contains all the details about the fees. I suppose they are hoping that people will sign up because the first letter sounds so good, and not bother to read the second letter.
It isn’t clear if this lawsuit is the same one we previously reported on.
The basics are that Chase has been recommending to customers facing hardships but current on their loans that they stop paying the loans otherwise they won’t be considered for a loan modification. This ends up causing all kinds of problems down the road when the customer is eventually denied a loan mod (most are) and Chase either demands all the payments in arrears immediately or ends up foreclosing in parallel with the loan modification process. In either case, it’s not good.
Now its official, having come out of the mouth of JP Morgan Chase CEO Jamie Dimon: Chase says that it is going to cut 15% of its cardholders off completely and close their accounts. Why? He claims that the new legislation makes those customers too risky because they can’t make adjustments over time as the customer’s risk profile changes.
I’ve read the new rules. There are still plenty of opportunities to jack up rates, so I’m not sure what he is talking about.
Quite a while back in one of my posts I questioned whether it was that certain customers that were inherently risky, or getting their rates jacked WAY up caused them to become more risky? If someone is current on their account but the bank determines they are too risky so they jack their rate from 13% to 29%, and the customer can no longer afford the minimum payment, who’s fault is that?
I read an article back in 2008 (I wish I could find it again) about a community bank in Florida that offered the same rate to prime borrowers with good credit and sub-prime borrowers with not-so-good credit. It was a reasonable and relatively low rate. As the rates for sub-prime borrowers nation-wide was heading through the roof at that time, this particular banks rates of default among both types of borrowers was the same.
The bottom line is that banks like Chase jack up card rates because they can and because they think they will make more money that way, and they have for years. That card issuers are losing money on their credit card portfolios now is in my opinion highly related to the fact that they jacked peoples rates so high they can’t afford them. Sure, offering way too much credit to some people that they shouldn’t have contributed as well, but I can’t help but wonder how many of the people in default on their credit cards wouldn’t be if they didn’t have the incredibly high interest rate and all the late and other fees.
(soapbox off)
This story is a sad one but quite typical of Chase. Every loan modification story we hear, we learn more about just how broken the Chase loan modification machinery is.
A responsible homeowner has been in her home for 12 years, with a mortgage that was very much within her means. But she got laid off, exhausted her savings, and her prospects aren’t good. She was laid off in March 2009. In November of 2009, applied for a loan mod with Chase. She is still waiting for an answer 7 months later. What does Chase have to say about this?
When the story’s authors contacted Chase, Chase claimed that they had only received the paperwork the day the journalists first contacted them. Is it really possible for paperwork to rattle around inside Chase and only surface after seven months? That appears to be how things work there.
The good news is that once contacted by the media, Chase started working on her loan mod. So, the way to get a loan modification going is to have the media contact Chase and inquire about it. Hmm.
Chase CEO Jamie Dimon has had his Chicago mansion on the market for 4 years and has recently reduced the selling price another $1 million to $9.5 million. He originally listed the property 4 years ago for $13.5 million.
I wonder if his mortgage is current?
According to the J.D. Powers customer satisfaction survey, the three largest banks, JP Morgan Chase, Citigroup, and Bank of America consistently rank near the bottom in customer satisfaction.
In a letter sent to cardholders, Chase is urging customers to use credit (i.e. sign for the transaction) rather than debit (i.e. enter PIN numbers) claiming that credit transactions are more secure than debit ones because you don’t have to punch in your pin (which someone might see. But security experts seem to agree that debit transactions are much more secure than credit ones.
Chase’s motivation in this is no surprise. When you do a debit transaction they get maybe 5-10 cents from the merchant. When you do a credit transaction, the merchant pays 30 cents plus 2-3%, normal credit card rates.
Use debit rather than credit to make life easier for merchants.
The full story is here.