The largest bank in the United States, JP Morgan Chase, had agreed to pay $2.5 million to settle a class-action lawsuit over its extra fees and higher interest rates it charged from cryptocurrency transactions.
The case stemmed from a lawsuit filed in a Manhattan federal court two years ago, accusing Chase of charging surprise fees when it stopped letting customers buy cryptocurrency with credit cards and, instead, treated their purchases as cash advances.
One of the plaintiffs, Brady Tucker, claims that the bank charged him both extra fees and substantially higher interest rates on the cash advances than on the credit cards and refused to refund $160 in extra costs when he complained.
JPMorgan was dismissive of claims surrounding its approach towards financing cryptocurrency transactions, noting that clients can use their debit cards to avoid incurring cash advance charges.
According to the lawsuit, the troubles began snowballing in 2018 when several banks, including JPMorgan, decided to block credit-card purchases of digital currencies on venues around the world.
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Days later, the plaintiff called the bank’s staff to complain that hefty cash advance fees were appearing on his card statements. Those included $143.30 in fees and $20.61 in surprise interest charges for five cryptocurrency-linked transactions that occurred between January 27 and February 2. However, the customer service refused his request to dispute the charges.
Later on, however, JPMorgan changed the course and introduced its own digital token for real-world use. Dubbed ‘JPM Coin,’ the stablecoin facilitates the transfer of payments between institutional clients, the latest step in Wall Street’s evolving approach to the crypto space.
JPMorgan is also widening the experiment with the release of its own blockchain platform, Quorum, which allows institutions to keep track of financial data.
JPMorgan was not the only financial institution that imposes hefty charges for transactions associated with cryptocurrency. Visa and Mastercard were also accused of changing the merchant classification code of several crypto exchanges, prompting banks to treat card purchases on those sites as cash advances.
Several banks have already backed away from digital currencies as they fear that allowing purchases of cryptocurrencies using borrowed money could leave them on the hook if the buyers’ bets go wrong, and they cannot repay their debts. Credit transactions can also create big headaches for banks if stolen cards are used to buy untraceable cryptocurrencies.