Recently a customer of Chase wrote to me with concerns about what is happening on his credit card. He had transferred a balance to a Chase credit card with a rate that was fixed for the life of the loan. Recently, however, Chase started charging him a mandatory monthly “Account Services” fee.
After reading this letter, I am disturbed by the fact that people are now being assessed an additional monthly fee by Chase even though they were originally promised an unchanging rate contingent upon their behavior as a responsible borrower.
Monthly account services fees, by regulation, are classified as finance charges.
Moreover, when someone gets a card that promises the same APR for the life of the debt, then it is reasonable for them to expect that the method by which the finance charges are calculated will remain constant as well.
This change will mean that, for the same amount of debt, customers will be paying higher finance charges. Chase has clearly broken its promise to keep a constant method of calculating finance charges through the life of the loan. An increase in service fees has the same end result as an increase in the APR, which violates the marketing promise that Chase made to these costumers.
My advice for the writer of this letter is to email the Chase CEO explaining why he feels it is unfair to see more finance charges after the promise that the finance rate would stay the same. If that doesn’t work, he should determine whether he can get a better rate elsewhere, and if so, transfer the balance off the Chase card. In this case, the Balance Transfer Credit Cards section at Card Hub (owned by the same company as this blog) will be helpful in finding the right card to transfer the balance to. Next, he should write a letter to the regulators calling for consumer advocacy. Finally, publicity can be a powerful instrument for change, so I suggest he let the public know what’s going on by alerting reporters and advice forums such as this one.
The letter sent to me is included in its entirety below:
Several years ago I transferred some balances onto Chase credit cards that were offering very low (2.9% through 4.9%) interest rates which Chase promised would last “for the life of the loan.” I have a high credit rating and have never made a late payment on any bills of any kind.
Recently, I (and many other Chase customers in my exact circumstances) have received a Change of Terms notification from Chase: in January of ’09, our accounts will go from having no fee to having a $10/month “Account Service Fee,” and our minimum payments will more than double (from 2% to 5%). On the phone, Chase offered to keep minimums at 2% if you agree to an increase in interest rate to 7.9%.
When this situation was reported to the OCC, the OCC said they actually initiated this change made by Chase. According to the OCC, the higher minimum payments will be of great benefit to consumers because it will help to get them out of debt more quickly. However, the OCC rep I spoke to was unable to explain how the $10 fee or the option to raise interest rates would benefit consumers.
I – and the many other consumers affected by these changes made by Chase – do not view this as beneficial. To us, it seems that Chase intentionally misrepresented the terms of their original offer in order to lure consumers into transferring balances, so they could later hike up their fees and their interest rates. Of even greater concern than
Chase’s actions, is the rude, oblivious attitude of the OCC’s phone representatives, who seem unwilling to acknowledge that such a large increase in minimum payments will force many people into bankruptcy and default. Most consumers will be forced to accept the raise in interest rates in order to keep their minimums low, and it should be obvious to the OCC that this is a manipulation by Chase which allows them to legally break their promise to keep interest rates low “for the life of the loan.”
How can we prevent Chase from doing this?