Federal regulators on Thursday ordered Chase Bank and JPMorgan Chase to refund $309 million to more than 2 million customers for illegally billing them for credit-monitoring services they never received.
Chase also must pay $80 million in fines, submit to an independent audit, and strengthen oversight of third-party vendors who manage credit card “add-on” products that promise to protect customers from identity theft and fraud.
The Consumer Financial Protection Bureau took action after an investigation revealed that Chase unfairly charged many customers for the add-on services without or before receiving the customers’ written authorization between October 2005 and June 2012.
Some customers paid monthly fees of between $7.99 and $11.99 for several years even though the add-on services they’d been promised were not performed, according to the bureau.
If the fees caused the customers to exceed their credit limits, they were charged additional fees and interest, the bureau said.
“This enforcement action guarantees an end to these unfair billing practices and requires that Chase completely repay those consumers who were wrongly charged,” Richard Cordray, director of the bureau, said in a statement.
Customers already should have received full repayment, plus interest, either as a direct deposit into their accounts or by check in the mail.
Anyone who thinks they are eligible for a refund but did not receive one should contact Chase.
The bank stopped signing up new customers for the add-on products in mid-2012 and will fully exit them by the end of this year, said Bill Wallace, head of operations for consumer and community banking for Chase.
“Any mistakes like these are regrettable and we are committed to ensuring our partners and vendors hold themselves to the same high standards that our customers expect of us,” Wallace said in a statement.
Consumers should be wary of deceptive offers for overpriced credit card add-ons that don’t stop identity theft or raise your credit score, said Ed Mierzwinski, consumer program director for U.S. PIRG, an advocacy group.
“No matter where you bank, all consumers should check their credit card and checking account statements for recurring $10.99-$19.99 monthly fees for ‘identity protection’ or ‘credit monitoring,’” Mierzwinski said. “Cancel, demand a refund and complain to the (Consumer Financial Protection Bureau).”
Instead of buying add-ons, Mierzwinski said, consumers should check their credit reports at annualcreditreport.com, which offers free credit report monitoring.
Also Thursday, British and American regulators announced that JPMorgan Chase & Co. had admitted wrongdoing and agreed to pay nearly $1 billion in penalties for unsafe derivatives trading practices that resulted in $6 billion in losses for the bank in 2012, a debacle nicknamed “The London Whale.”
In another enforcement action Thursday, the company received a cease-and-desist order from the U.S. Office of the Comptroller of the Currency for using improper procedures to collect debt from customers of its credit card, auto-lending and student-lending services, as well as from military service members.
The comptroller ordered the bank to review all debt collection litigation and accounts from the past few years in order to identify affected customers and to submit a plan to remediate them.