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Chase’s new 5% minimum payment: An increase so onerous, it would make a loan shark’s mother proud

Considering that this (February 13, 2009) post that I have found entitled, “Chase Raises Minimum Payments on Credit Cards, Adds Fee,” is on a website with the name, The Truth About Credit, I see some irony.  Quoting from the article, we note that the Chase corporate line has been used abundantly:

In an effort to crack down on consumers who hold large credit card balances, but don’t seem to make any progress in paying them off, Chase has upped minimum payment requirements and added a related fee.

The credit card issuer notified hundreds of thousands of customers who carry balances and hold low promotional interest rates that a $10 monthly fee (that accrues interest) will be added to their accounts going forward.

Additionally, these customers will be required to make larger monthly minimum payments; instead of 2% of the balance, 5% will now be required each payment cycle.

That’s a substantial jump in minimum payment, as those targeted by the policy have been known to hold large balances for over two years with little repayment, according to a Chase spokeswoman who spoke with USA Today.

But apparently Chase is offering customers who phone in a second alternative, a higher fixed APR set at 7.99% (is it really fixed?).

Let’s take this in order of first appearance, starting with, “don’t seem to make any progress in paying them off.”  As I have documented, this is not true relative to my account; see my post entitled, “Only Paying the Minimum–Not True in my Case with Chase.”

It’s also not true relative to many other account holders; see the earlier post and analysis entitled, “Chase “aimed at” account holders who were only paying the minimum? Someone must need new eyeglasses.”

Regarding, “customers who carry balances and hold low promotional interest rates that a $10 monthly fee (that accrues interest) will be added to their accounts going forward,” I am trying to resist outright sarcasm. Unfortunately, this passage is so blatantly absurd, I’m finding it difficult to avoid a “duh!”  A $10 monthly “fee (that accrues interest)” means that the promotional rate has been violated, as once new “finance charges” are added and “accrue” (see my posts illustrating Panel 1 and Panel 2 of the actual change in terms notice), the new rate is higher than the promised rate.  This also means that “the truth about Chase” is that according to numerous class action lawsuits, it violated Truth in Lending laws.

As for “those targeted by the policy have been known to hold large balances for over two years with little repayment,” I’ve already addressed this above.  However, I’d like to reiterate some of the points made in earlier posts.  For one, it is irrelevant how big or how little the payments may have been from account holders who have at least made the minimum monthly payment amounts that were printed on their statements.  This applies to every customer who was “targeted,” because if those customers had not been making at least their minimum monthly payments, they would have already been converted to usurious default rates. 

Further, it remains extremely insulting, especially in these challenging economic times, that account holders who have been making their required payments (and therefore meeting their obligations) would be portrayed in a negative light by Chase.  Rather, those of us who have been “hit” by Chase were deceived by a false promise of a “fixed APR Until the balance is paid in full” loan.

To disparage individuals who were previously selected as Chase’s “most Valued Cardmembers” as anything less than sterling examples of cardholders who take managing their responsibilities seriously, is indeed, irresponsible and reprehensible.  I hope Chase is punished for this and I consider what it has done to be one form of damage that it has inflicted upon me and other account holders.  (Not being a lawyer, I do not wish to interpret nuances of defamation, but I find myself intrigued by the notion that this legal term might very well be applied to describe the situation here.)

Relative to a “a second alternative, a higher fixed APR set at 7.99%,” since I was quoting from the top of the above referenced post, I am not sure what the “first alternative” would have been, but I expect it was the “demand note” attempt on the part of Chase to collect the entire amount owed and close the account in order to avoid the changes.  Nevertheless, switching account holders to the higher 7.99% rate in exchange for allowing the account holder to prevent the gargantuan increase in the minimum monthly payment is alleged in class action lawsuits to be consistent with “bait and switch.”  Also, the 7.99% rate is for a limited duration.  Finally, to present an interesting caveat, is the fact that Chase might then turn right around later, and demand a 5% minimum payment once the account holder has agreed to the higher rate

Notwithstanding any determination one way or another through adjudication, Chase’s new 5% minimum payment demand is certainly coercive.  It enriches Chase and hurts account holders.  It places customers in harm’s way of being unable to remain solvent because that payment increase (multiply an account balance times 2.5) is so onerous that it would make a loan shark’s mother proud.  In the event that the account is held by a small business owner, or a person with a family (like me), then it will have consequences that will reverberate to impact many more persons than just the account holders themselves.

Not addressed in the post under discussion here, is the truth about “opt outs.”  The “truth about Chase’s executives” is that they testified before Congress and used a discussion about an “opt out” to illustrate the means by which Chase treated customers “fairly.”  As described, an “opt out” would allow customers to reject the new terms and “if they wish, they can opt out and close an account and pay off the balance at the old interest rate over time.”  Since there is no opt out, then one is led to conclude that Chase executives obviously lied in presenting such a portrayal.  I maintain that the issue of a missing opt out is the most dangerous precedent of all (as other credit card issuers are definitely watching Chase, to see if it can get away with this). 

The “truth about Chase” is therefore as follows: it is engaged in a campaign to “pull the wool over the eyes” of the media, website publishers, Congress, other account holders, and me.  This constitutes a failure on the part of its leadership to demonstrate competence in managing the long-term reputation of Chase.  Such behavior is an affront to shareholders, account holders, and stakeholders, including taxpayers who have forked over $25 billion in bail out money to a financial institution that has demonstrated negligence due to its extremely unethical actions (thus all Americans certainly do, in effect, own shares).

This is why you should “join the fight” and the reason has declared in a message to credit card companies: