A class action lawsuit was filed against JPMorgan Chase Bank and Washington Mutual Bank (WAMU) alleging that the banks fraudulently and illegally reduced credit limits on HELOCs across the U.S.
According to the lawsuit, these reductions were made to limit the banks’ exposure to the risk of the the country's housing market collapse.
The case was filed on Pascal Majon’s behalf. The suit alleges that the banks’ “intentional systematic, mass reduction on their customers’ HELOCs and their intentional systematic concealment of the reasons for their action and their processes, standards and requirements for reducing limits, suspending accounts , and allowing reinstatement was and remains illegal.”
Majon’s $27,000 HELOC from WAMU was reduced in May of last year and completely suspended in January 2009.
The law suit also alleges that both Chase and WAMU have broken their contractual obligations to their HELOC account holders by reducing or freezing their credit limits without first reasonably assessing the value of each affected property or having a factual basis for reducing or suspending the accounts.
The suit was filed in the U.S. District Court for the Northern District of Illinois.