Class Says Chase Bank Cheats on Blank Check Loans

SAN FRANCISCO (CN) - Chase Bank USA defrauds its credit-card customers by sending them "blank checks," which it says are good for loans to be paid off at low interest "for the life of the loan," then calling in the loan and raising the interest rate, a class action claims in Federal Court.

The class claims that in November 2008 Chase started "'calling the loans,' i.e., requiring customers to suddenly pay off all outstanding balances in full or otherwise be subjected to significantly higher interest rates under new and unfair terms."

The class is "Chase credit card customers whom Chase offered separate loans under terms that were in material respects distinct from the credit card terms."

It Claims that "Chase initiated these loans from time to time by sending its credit card customers 'blank checks.' Customers may opt to use these checks, typically in amounts not to exceed the credit limit of their credit cards, and in so doing accept the terms of the loan offered by Chase. ...

"beginning in November 2008, Chase has sent customers with outstanding check balances 'notices,' stating that their check loans would be subject to an additionally monthly 'Service Charge-Finance Charge,' and that their minimum monthly repayment on the check loans would be raised from 2% to 5%. ... The 'notices' further state that customers must pay off their entire loan balances in full immediately or be subject to the new and unfair terms.

"In response to specific customer complaints, Chase has further attempted to coerce customers to pay their loan balances in full immediately to avoid imposition of the higher interest rates and new terms, or, alternatively, to transfer their loan balances to accounts with higher and variable interest rates."

The class demands an injunction and punitive damages for fraud, breach of contract, business law violations, negligent misrepresentation, and unjust enrichment. It is represented by Michael Sobol with Lieff, Cabraser & Heimann.

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