(CN) - Washington Mutual and JPMorgan Chase can pay $2.5 million to settle claims that they arbitrarily froze and cut limits on home equity credit lines, a federal judge ruled.
Lead plaintiffs Jeffrey and Jenifer Schulken, of Cupertino, Calif., sued the banks in 2009, alleging Truth in Lending Act violations, unfair competition and other claims.
Chase, which acquired Washington Mutual in 2008, tried to dismiss the complaint four times, and the Schulkens amended the complaint five times.
The Schulkens say Chase informed them by letter that their home equity credit lines would be suspended because they did not have enough monthly income to satisfy their debts. According to the complaint, Washington Mutual had a purported credit application from the couple that said they earned $11,200 a month. Chase allegedly said it had to cut their credit because they actually earned about half that.
But the Schulkens say that the $11,200 figure was "inaccurate," that they had never "provided such an inflated income figure to WaMu, and that if the Schulkens' file indicated such an income, then WaMu had intentionally misrepresented their income."
The fifth amended complaint sought to certify two classes of borrowers: an "inability to verify" class and a "stated income" class.
The "inability to verify" class would consist ofborrowers whose home equity credit lines were blocked because they did not provide Chase with tax returns or pay stubs; the "stated income" class would involve borrowers whose credit lines were blocked because Chase found a "material adverse change in their finances."
U.S. District Judge Lucy Koh in San Jose partly certified the action in January. Koh certified the "inability to verify" class, and a subclass of borrowers whose credit lines were suspended because Chase could not verify their financial circumstances.
The parties reached a settlement in April, and held a fairness hearing last week.
On Tuesday, Koh called the settlement reasonable and fair, and adopted the findings from her January order.
Members of the "inability to verify" class will receive a $75 payment, and the subclass will receive $25, for a maximum payout of around $1.8 million. The total settlement amounts to around $2.5 million.
The court also awarded a $10,000 incentive award to the Schulkens as class representatives.
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