Bank Broke Its Promise That Interest
Rates "Will Never Exceed 24 Percent"
Trial Lawyers for Public Justice (TLPJ)
has filed a national class action lawsuit against Chevy Chase Bank
charging that the bank breached its contracts with cardholders by
raising their interest rates in excess of a promised 24 percent
ceiling. After years of promising in its agreement that "your
annual percentage rate will never exceed 24 percent," the bank
tried to amend the agreement without the legally required notice --
and then began charging up to 27 percent.
"This is unconscionable,"
said TLPJ Foundation President Joseph A. Power, Jr. of Chicago's
Power, Rogers & Smith. "Chevy Chase Bank broke its word. We
intend to hold it accountable."
The lawsuit, Wells v. Chevy Chase
Bank, FSB, was filed Friday in Circuit Court for Baltimore City,
Maryland, on behalf of a nationwide class of hundreds of thousands
of cardholders. For years, the company had its home office in Chevy
Chase, Maryland, it promised cardholders their interest rates
"will never exceed 24 percent" (the maximum rate
permissible under Maryland law), and it further guaranteed
cardholders that it would comply with Maryland consumer credit laws.
Those laws require banks to provide specific written notice of any
proposed amendments to cardholder agreements and to give cardholders
the right to refuse the amendments and pay off their balances under
the old terms.
In January 1996, Chevy Chase
relocated its home office to McLean, Virginia, where state law
places no limit on interest rates. The bank immediately, and without
the required notice, tried to amend the agreement to make Virginia
law apply and eliminate its promise not to charge more than 24
percent. In addition, Chevy Chase increased other charges and added
new fees for cardholders who made their payments late or exceeded
their credit limit. The bank then began charging its customers these
higher rates and fees -- even on balances accrued before Chevy Chase
moved to Virginia.
"This is an example of pure
corporate greed," said John T. Ward of Ward, Kershaw &
Minton of Baltimore, who is serving as lead counsel in the case.
"If this financial institution is allowed to unilaterally
change the terms of its contracts with consumers to charge such
excessive interest rates and fees, nothing will stop other credit
card issuers from immediately following suit. Chevy Chase is
attempting to take advantage of its customers, and we plan to put a
stop to it."
TLPJ's lawsuit alleges that Chevy
Chase breached its contract with cardholders by:
interest rates above the promised 24 percent cap
the new, higher interest rates to balances cardholders accrued
under the old contract terms
to provide proper notice of contract amendments
the method by which it calculated cardholders' finance charges
its late fees and penalties for customers who charge more than
Consumer Advocate Ralph Nader has
spoken out against Chevy Chase's practices and even written a letter
to the B.F. Saul, CEO of Chevy Chase. Nader did not receive a
The lawsuit also names First USA as a
defendant because First USA purchased Chevy Chase's credit card
business in September 1998.
In addition to Ward, TLPJ's legal
team in this case includes Michael P. Malakoff of Malakoff, Doyle
& Finberg in Pittsburgh; and TLPJ Staff Attorneys Sarah Posner
and F. Paul Bland, Jr.
To read more about this case use this
|Trial Lawyers for
Public Justice is the only national public interest law firm
dedicated to using trial lawyers’ skills and resources to
advance the public good. Founded in 1982, TLPJ utilizes a
nationwide network of more than 2,400 outstanding trial
lawyers to pursue precedent-setting and socially significant
litigation. It has a wide-ranging litigation docket in the
areas of consumer rights, environmental protection, toxic
torts, worker safety, civil rights and liberties, and access
to the courts. TLPJ is the principal project of The TLPJ
Foundation, a not-for-profit membership organization. Its
headquarters are in Washington, D.C., and it has a West Coast
Office in Oakland, CA. TLPJ’s State Coordinator in Maryland
is Simon Walton, tel. 410-235-6425. Their website is at www.tlpj.org