Last updated on May 27th, 2021
JPMorgan Chase’s lack of fair notice to credit cardholders regarding their classification of cryptocurrency purchases has led to an out-of-court settlement.
JPMorgan Chase was hit with a class-action lawsuit after some cardholders discovered that cryptocurrency purchases were classified as “cash advances” rather than regular purchases.
Cash Advances Have Higher Interest Rates
Cash advances made with Chase credit cards incur higher fees than regular purchases. Take a consumer with excellent credit who uses the Chase Freedom Unlimited®, for example, to buy crypto. Cardholders see a difference between interest rates for a regular purchase and a cash advance that amounts to 10%. This is a significant difference, especially if the cardholder makes payments in several installments.
Chase Allegedly Violated the Truth in Lending Act
Chase did not notify customers that cryptocurrency purchases were not considered to be regular purchases. This lack of fair notice landed Chase in hot water. Therefore, their policies are deemed as unfair practices. As such, the bank has been accused of violating the Truth in Lending Act. The Truth in Lending Act requires credit issuers to notify customers of any significant change in charges or terms. This notification must be in writing.
The class-action suit also alleges that the bank refused to refund the excess charges to affected customers.
Chase does not charge similar fees for crypto purchases made using debit cards issued by the bank, which is widely regarded to be a double standard. Chase announced that cryptocurrency could not be purchased using their credit cards shortly before the class-action suit was filed in 2018. This policy was also adopted by other card issuers, since purchasing cryptocurrencies using credit is seen as a risk.
Chase Will Settle Out of Court
Per the complaint, “The complete lack of fair notice to Chase’s cardholders caused them to unknowingly incur millions of dollars in cash advance fees and sky-high interest charges on each and every crypto purchase.”
JPMorgan Chase has agreed to settle the dispute out of court. Details of the settlement have not been disclosed. They have until May of 2020 to come to an agreement, or proceedings will continue.