Great news from the Consumer Financial Protection Board today. JP Morgan Chase, a major credit card issuer, has been hit with a $309 million fine for defrauding customers. More than 2 million customers will get refunds for unfair fees imposed by JP Morgan Chase.
In addition, JP Morgan Chase will be required to audit its own procedures and present evidence to the CFPB that it has stopped the practices that led to the fine—specifically, billing customers for services they weren’t being provided.
This is precisely why the CFPB exists. JP Morgan Chase was breaking the law and getting away with it. The amount of money being taken through these fees was small enough to not be worth suing over individually, but in the aggregate, it represented a big transfer of money—illegally!—from customers to their credit card company. There was a time when, even if they noticed it happening, customers wouldn’t have been able to do anything about it.
That time is over.
The important thing here is that the incentives are changed for banks and financial institutions. Where once they could steal from customers with impunity and pocket all of the money, now there’s actual enforcement of the laws protecting consumers, with a real cost both in penalties and in the work they have to do to ensure future compliance. That new reality will put a check on future misconduct by banks.
This isn’t the first action the CFPB has taken against a credit card company and it won’t be the last.
The fact that the CFPB works—that it changes the balance of power between banks and their customers—is exactly the reason that Senate Republicans tried to destroy it by blocking the appointment of a director for the agency.
Fortunately, the Senate GOP broke, and Richard Cordray was able to win approval to head this incredibly important agency. 2.1 million JP Morgan Chase customers can breathe a sigh of relief over that.