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JPMorgan Skewered for 'Illegal Credit Card Practices'

NEW YORK (TheStreet) -- Just a few hours after four regulators announced JPMorgan Chase (JPM) had agreed to $920 million in fines related to the "London Whale" hedge trading debacle, the Consumer Financial Protection Bureau (CFPB) announced the company had made $309 million in refunds to credit card customers.

JPMorgan's two largest banking subsidiaries -- Chase Bank USA, NA and JPMorgan Chase Bank, NA -- were ordered to make the refunds to roughly 2.1 million credit card customers, "for illegal credit card practices," the CFPB said in a statement.

The CFPB joined an investigation by the Office of the Comptroller of the Currency of JPMorgan's sales of "credit protection" services to credit card customers. Capital One (COF) agreed to a settlement over similar activities last year, agreeing to pay a large fine and make refunds to customers.

The OCC also charged JPMorgan Chase a fine of $60 million.

"The agencies found that Chase engaged in unfair billing practices for certain credit card 'add-on products' by charging consumers for credit monitoring services that they did not receive," the CFPB said, adding that the bank "charged customers as soon as they enrolled in these products even if they were not actually receiving the services yet."

The illegal practices went on from October 2005 until June 2012, according to the CFPB, which said "monthly fees ranged from $7.99 to $11.99 even though the promised services were not performed. In some cases, consumers paid for these services for several years without receiving all of the promised benefits."

The latest regulatory announcement brought JPMorgan's total for fines and customer refunds announced Thursday to $1.289 billion, including the four fines announced earlier by the OCC, the Federal Reserve, the Securities and Exchange Commission and the UK Financial Conduct Authority.

"We stopped new enrollments in these products in mid-2012 and will fully exit them by the end of this year," said Bill Wallace, JPMorgan's head of operations for consumer and community banking, in a statement. "We have already credited or refunded the customers affected," he added. "Any mistakes like these are regrettable and we are committed to ensuring our partners and vendors hold themselves to the same high standards that our customers expect of us."

Shares of JPMorgan Chase were down over 1% in afternoon trading, to $52.71.

JPM ChartJPM data by YCharts

Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Stock quotes in this article: JPM, COF 
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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