JPMorgan Chase & Co was hit with a class action lawsuit over unexpected fees when it began to prohibit customers from purchasing cryptocurrencies with credit cards in January. At that time, they began treating the purchases as cash advances, according to Reuters.
The national class action lawsuit was filed on Tuesday, alleging that the company charged extra fees on the purchases, as well as substantially higher interest rates, equivalent to the rates associated with cash advances. These fees were not returned to customers who complained, according to the article. The lawsuit is asking for actual damages, plus statutory damages of $1 million.
According to Chase spokeswoman, Mary Jane Rogers, the bank stopped processing these purchases due to the associated credit risk. She said that customers were still permitted to purchase cryptocurrencies with their Chase debit cards without incurring cash advance fees.
Besides JPMorgan Chase, a number of international banks have banned the use of credit cards in the purchase of cryptocurrencies after a drop in the value of Bitcoin, in anticipation of a regulatory crackdown. These include Lloyds Banking Group Plc, Virgin Money, and Citigroup.
The case is Brady Tucker et al v Chase Bank USA, U.S. District Court, Southern District of New York, No 18-3155. Brady Tucker, the named plaintiff in the lawsuit is an Idaho resident who was charged $143.30 in fees and $20.61 in surprise interest charges by Chase on five cryptocurrency transactions between January 27th and February 2nd, according to the lawsuit. By extension, it is expected that possibly thousands of other Chase customers experienced similar charges, without any advance warning.
According to the plaintiff, he called Chase’s customer service department to dispute the charges, but was denied. The lawsuit ultimately accuses Chase of violating the U.S. Truth in Lending Act. According to this regulation, credit card issuers are required to notify customers in writing of any significant change in charges or terms.
JPMorgan Chase has been under a lot of heat lately. Chairman and CEO Jamie Dimon received much criticism for calling Bitcoin a fraud. He apologized for the statement in January, stating that “the blockchain is real.” Despite his semi-apology, Dimon continues to express skepticism about Bitcoin, and the response of governments should it grow too big. He also remains skeptical about ICOs, and has made other sharp criticisms of cryptocurrency and its investors. According to Dimon, “If you’re stupid enough to buy it, you’ll pay the price for it one day.” Indeed, part of that price was paid directly to Dimon’s company, in the form of cash advance fees and high interest rates.
In light of this lawsuit, we may see Dimon walk back his comments further, especially given that JPMorgan Chase announced its own blockchain-based system to verify global payments, reducing transaction times “from weeks to hours.” This would be in direct competition with Ripple and other existing solutions and blockchain projects. It remains to be seen whether the company will utilize a private blockchain, or if they will make some sort of public offering of their own.