JPMorgan Chase Bank Visa, Mastercard Foreign Exchange Rates Class Action

Consumers can now use credit cards to buy things all over the world, thanks to the Internet. However, the complaint for this class action claims that JPMorgan Chase Bank, NA violates its agreements by charging customers excessive or fictitious exchange rates. The complaint alleges that Chase does not charge the promised rate, or charges even when no currency has been exchanged at all.

The Nationwide Class for this action is all persons or entities with a Visa or Mastercard credit card with JPMorgan Chase, who made a transaction in a foreign currency using the card within the applicable statute of limitations, where the exchange rate imposed was not a government-mandated rate. Alternative California and Illinois Classes have also been defined, for cardholders living in those states.

Visa and Mastercard do not themselves issue credit cards to consumers. Rather, they permit financial institutions to issue them, while they perform as processors. They impose rules on the issuers. The complaint alleges, “These rules provide, inter alia, that the foreign exchange (‘FX’) rates applied to consumer payment card transactions in foreign currencies for each day will either be wholesale FX market rates or a government-mandated rate. The vast majority of jurisdictions do not have government-mandated rates.”

Chase passes these terms on to customers with its agreements, the complaint alleges, “promising cardholders … that the FX rates applied to foreign transactions will be either wholesale market rates or, in jurisdictions that have them, government mandated rates.”

Yet the complaint contends that the FX rates charged to customers are not the wholesale FX rates. Also, it says, “even when the FX rates imposed by Visa and Mastercard are within the trading ranges of the individual currencies within the wholesale market for the applicable dates, the methods by which the rates are imposed are unfair, in bad faith, and therefore in violation of the Cardholder Agreements.”

The language in the Cardholder Agreements lead customers to believe that the rates charged for FX bear some resemblance to the rates the card processors and banks themselves pay for exchanging currencies to process the transactions. However, the complaint says this may not be true: “In fact … the banks and Processors rarely engage in wholesale market transactions to facilitate the cardholders’ transactions.” The transactions are often instead settled in US dollars. “In these instances, the need for any currency conversion is a pure fiction, and any hidden charge for the same, and/or the manipulation of FX rates in breach of the Credit Card Agreements, is unlawful.” In other words, no foreign currency may have been involved at all.

Even when transactions are settled in foreign currencies, the complaint claims that “the need for currency exchange is minimal. The Processors are engaged in multilateral global transactions on a massive scale (i.e., doing multiple transactions in both directions—e.g., U.S. Dollars to Euros, and Euros to U.S. Dollars).” The processors therefore only need to exchange currencies for settling remaining net amounts.

Article Type: Lawsuit
Topic: Consumer
Tags: Breach of Contract, Credit Cards, Foreign Exchange