JPMorgan Chase has dropped the $10 monthly service fee it began charging thousands of Chase cardholders earlier this year and is refunding an estimated $4.4 million to the 184,000 affected cardholders, according to a statement released by New York Attorney General Andrew Cuomo.

Cuomo had accused the credit card issuer of illegally imposing the fee on customers who were lured by Chase’s low promotional interest rates on balance transfers. Chase cardholders were led to believe they would be able to lock in the low promotional rates until their balance was paid off, but earlier this year Chase announced it would be assessing a $10 fee on customers with large card balances who had made little progress paying down their debt.

“My office will not sit back and allow banks to promise one thing in its solicitations and agreements with consumers, and then when times get tough, change the deal, leaving consumers holding the bag,” Cuomo said. “Truth-in-lending laws prohibit this very conduct.”

Stephanie Jacobson, vice president of public affairs for JPMorgan Chase, said that “although the fee was permissible” the bank decided to nix the fee “in response to cardmember feedback” (”Cuomo Claims Victory for Chase Fee(asco),” Creditcards.com, March 30, 2009).

Industry observers speculate that Chase’s decision to discontinue the fee may also be a reaction to the numerous class action lawsuits filed against Chase by disgruntled consumers as well as the response to the intense atmosphere of scrutiny surrounding credit card companies and their business practices in general.

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