SAN FRANCISCO (CN) – A homebuyer claims in a federal class action that JPMorgan Chase Bank, “unlike other banks, holds advance principal payments in an undisclosed suspense account and purposefully delays crediting of such payments in order to maximize interest accrual on money that, under the terms of the loans, it has not earned.”
Lead plaintiff Kevin Kratzke claims Chase Bank delays crediting advance payments on principal to increase its profits. This amounts to illegal “pre-payment penalties” on advance principal payments, Kratzke claims.
He claims “that Chase, unlike other banks, holds advance principal payments in an undisclosed suspense account and purposefully delays crediting of such payments in order to maximize interest accrual on money that, under the terms of the loans, it has not earned.”
The 26-page complaint repeatedly refers to “promissory notes,” which it defines as “a standardized or ‘conforming’ Freddie Mac/Fannie Mae secured real estate mortgage and/or deed or trust (hereinafter referred to as ‘Promissory Note’) that was issued, originated and/or services by JPMorgan Chase Bank.”
The complaint states that despite promising a borrower’s right to prepay down the principal: “If the lender allows interest to accrue in a principal balance that is current and has been provided a ‘prepayment’ or APP, then interest is unearned by the lender and the amount of the interest is, in effect, a ‘pre-payment penalty.'”
Kratzke claims: “Chase’s policy and practice shortchanges borrowers who may make modest advance principal payments on their mortgages, with the magnified effect of allowing Chase a windfall in collecting additional payments from continuously accruing interest. The net effect to impose a ‘pre-payment’ penalty in the form of accepting but holding advance principal payments [is] to increase the bank’s bottom line and to breach its ‘order of payment’ crediting agreement found in the standard and conforming Freddie Mac/Fannie Mae mortgage/deed of trust loans secured in real estate.”
In fact, Kratzke claims, advance payments of $50 to $100 may result in small amounts of increased interest.
“(O)ver the course of a 15 or 30 year loan, Chase reaps many hundreds of dollars in windfall and illegally obtained gains, that results in thousands and thousands of dollars when the practice is multiplied over the loan periods and with hundreds of thousands of customers.”
Kratzke also claims Chase purposely programs its computers to delay crediting loan payments when the loan is current and no payment is due.
He seeks class damages for breach of contract and unfair and deceptive trade, an injunction, costs, and a third-party administrator appointed to facilitate and oversee repayment of the illegally collected interest.
He is represented by Timothy Cohelan and J. Jason Hill with Cohelan Khoury & Singer, of San Diego.