A U.S. district court judge in California has denied a motion by JPMorgan Chase Bank to dismiss a lawsuit that alleges the bank illegally reduced a couple's home equity line of credit.

Chase argued that the plaintiffs, Jeffrey Schulken and Jenifer Schulken, are former customers of Washington Mutual and they should sue the Federal Deposit Insurance Corp. (FDIC) — which approved Chase's acquisition of WaMu — not Chase. But the judge sided with the Schulkens. According to the plaintiffs' attorney Jay Edelson,

"Chase's unprecedented position was simple: Chase can harm former WaMu customers with impunity and anyone who suffers damage should sue the FDIC." Chase acquired the troubled WaMu with the approval of the FDIC in September 2008. The bank moved to reduce the plaintiffs HELOC in March 2009, claiming their income had declined. Plaintiffs claim their income hasn't changed and sued Chase for violating the Truth in Lending Act.

If the judge certifies the class act lawsuit, the plaintiffs' attorneys want the class to cover all Chase HELOC customers as well as former WaMu customers.

A Chase spokeswoman said the bank does not comment on litigation.

Chicago-based KamberEdelson also is pursuing class action litigation against two large institutions that are among Chase's peers for suspending and reducing HELOCs.

An FDIC spokesman could not be immediately reached for comment.

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