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• Loan Modifications are Good... Right?
• Loan Modifications: Helping Hand or Moral Hazard?
• Critique of the U.S. Mortgage Plan

In a rare break from real estate and mortgage posting, I felt compelled to write this following piece about Chase Bank and their unethical practices, which will contribute in no small way to our mounting housing pressures and revisited liquidity crunch...

Chase Bank is delivering a huge blow to its most creditworthy (i.e. least irresponsible) subset of cardholding customers by changing repayment terms in an unethical fashion.  This action also stands in direct contrast to Chase’s official testimony (to the U.S. Senate Committee on Banking, Housing and Urban Affairs) about providing “opt out” options when making policy changes.

Resisting the urge to hit people already down by asking why it is they racked up debt in the first place, consider asking these questions first:

• Were they paying it back?
• Can they prove a history of timely payments?
• Can they demonstrate a track record of over overpaying to reduce the principal?

If the answers come as a resounding yes to each question shouted by ~850,000 consumers in unison, then consider asking why Chase Bank should rock this boat?

Chase determined that “the total number of (these) customers (are) relatively low, but the balances that these customers carry amount to billions of unsecured debt”.

Great job Chase… way to solve the case!

Currently ~850,000 people who have been making timely repayments and overpayments for years have received notices that their minimum payments are being increased from 2% to 5%.

This may not seem like much, but to a consumer or small business owner struggling to pay off a $30k balance… the $600 monthly payment just increased to $1,500…

And a $60k balance with a $1,200 monthly payment just increased to $3,000.

Chase heavily solicited these consumers, and aggregated many more by buying up competing lenders too.  They posted record earnings while lending out money at 3.99%.  Then the realization hit home that they mismanaged the rest of their portfolio.  Then they took bailout money resulting in tax increases that will likely hit these same consumers the hardest.  Now they turn on their most loyal producers in a desperate attempt to make up losses.

Chase is effectively calling back loans they made to folks who paid a premium to receive favorable terms (similar to buying down the rate of a mortgage by paying a point), via balance transfer fees, and by the opportunity cost of forgoing a zero percent introductory rate for as many as 12 months.

The intention is clear:

Accelerate repayment of balances that were misleadingly, if not falsely, solicited as “life of loan” terms, and trigger usurious rate hikes on the resulting defaults.

Unlike bailouts for banks, car companies, and loan modifications, etc., there is not a single web message posted from any consumer affected by this, who did not communicate their history of unwavering determination to pay back their obligation.

Meantime, as an auto-reply to complaints filed by California-based consumers, Senator Barbara Boxer dismisses the matter as solved, by relating how she was “proud to work for passage of H.R.627, the Credit Cardholders' Bill of Rights Act”.  Her insipid self-congratulation is especially ironic, because it is this very legislation that has pushed companies like Chase to redistribute their usurious practices from non-performers onto those consumers who still have credit profiles left to defend.

So now the credit card industry officially joins healthcare, mortgage, and taxation as the most recent failed attempt to subsidize losses… you know… the new standard:  squeeze the few producers still standing to shoulder the burden of the ever-growing masses who do not.

This straw may be the one to break many of the 850,000 backs, which in turn, will create a further drain on the system.

So at the next cocktail party, when someone launches into the whole “problem today with the welfare-disability-loan-modification-unemployment-benefit-receiving-populous” discourse… consider mustering your most sarcastic reply… that it officially does not pay to produce.