Will Credit Card Lawsuit Against JPMorgan (NYSE:JPM) Expand to Class-action Status?

J.P. Morgan (NYSE:JPM) has a lawsuit filed against it from a former credit card customer which seeks class-action status for the raising of interest rates even after a customer closed his account with them.

According to the complaint, J.P. Morgan Chase communicated to its customers that they would be allowed to “opt out” of increased interest rates on the outstanding balance of their credit cards by simply closing their accounts. When Barry Woldman chose to exercise that option on his account, he had his credit card rates allegedly raised anyway, actions that resulted in the lawsuit being filed.

The lawsuit contends that a number of credit card customers closed their accounts and had the outstanding balances on them raised from the existing 11.99 percent to 17.99 percent from October to November. Woldman claims his account was one of those hit by the interest rate increase.

While there was legislation moving through Congress at the time which would limit increasing interest rates on credit card balances unless a customer was over 60 days late on their payments, the higher interest rates put in place during that time by J.P. Morgan Chase were applied before it became law.

When reading what the lawsuit is asking for, which includes a declaration which would force J.P. Morgan to back up the alleged agreements and compensatory damages, it did make me wonder what this agreement was and how it was supposedly communicated to the customers.

Was it a signed and binding agreement, a verbal commitment, or something else. If it was something on paper, it’s hard to see why company would employ those types of practices which would obviously lead to these actions and a potential huge hit of a class-action lawsuit which would keep them in a negative light and which could cost them millions needlessly.

It makes me a little skeptical, but we’ll see as the story unfolds whether there is any merit to the allegations or not. But even if there isn’t, just the filing of the lawsuit and bringing it to the public eye will damage the company and hang another negative weight around their neck.

This seems pretty cut and dried to me if this individual customer has proof of being told he could do what he did without having his interest rates raised on his credit card balance, and then had the action taken against him anyway.

It would have been much easier to quietly take care of it and change the rates if that’s all there really is to this. It doesn’t make much sense for Chase to allow this to go forward over a very small issue which has the potential to grow in to a mountain.

The hearing in Chicago concerning the case is scheduled for April 9.