JP Morgan Chase, Washington Mutual HELOC Lawsuit Certified as Class Action

U.S. District Judge Lucy Koh has certified a lawsuit against JP Morgan Chase and Washington Mutual for allegedly reducing the credit limits on their home equity lines of credit improperly. HELOC, standing for Home Equity Line of Credit, is a loan where a bank agrees to lend a certain amount of money to a borrower in a limited period of time, with the borrower’s home equity as the collateral. The lawsuit alleges that JP Morgan Chase improperly reduced, suspended, or terminated borrowers’ lines of credit, claiming that their properties or incomes had declined in value, but giving no legitimate justification for this determination. JP Morgan Chase acquired Washington Mutual in 2008.

The lawsuit further alleges that the banks fabricated a monthly income for the couple that was far higher than any figure they had given during the application process.

The lawsuit was filed in Cupertino, California in 2009 by Jeffrey and Jenifer Schulken. This couple, which owns their own small business, alleged that the banks suspended their HELOC account after claiming that they would be unable to pay back the loan, but they experienced no decrease in earnings and had never missed a payment. They returned an IRS tax form to Chase to prove their earnings, but were notified that their HELOC account had a zero balance because they had not provided the requested documentation, resulting in fees. The lawsuit further alleges that the banks fabricated a monthly income for the couple that was far higher than any figure they had given during the application process.

JP Morgan Chase and Washington Mutual are not the only banks that have been embroiled in this fiasco, as SunTrust has also been sued for similar violations. It is further alleged that other major banks engaged in similar suspect actions, but are not yet the subject of lawsuits. The newly-certified class includes “only those members who signed contracts that (1) arise from heritage WaMu customers, and (2) state that the borrower must provide, upon the lender’s request, ‘a current financial statement, new credit application, or both.’” The federal judge also certified a subclass of borrowers whose credit lines were suspended because Chase could not verify their financial circumstances.

The most recent lawsuit against JP Morgan Chase alleges violations of the federal Truth in Lending Act, unfair competition, and other claims. The class is thought to include thousands of Chase HELOC customers. If you or someone you know has had their home equity line of credit reduced improperly or illegally, you may have legal recourse to seek compensation for damages. Do not hesitate to fill out the free form on the right to learn more about your potential legal options.