A new federal lawsuit accuses some of the largest US banks – including JPMorgan Chase, Bank of America, Wells Fargo, Citibank, and others – of secretly coordinating to fix prime lending rates and inflate borrowing costs for millions of Americans.
Filed in the U.S. District Court for the District of Connecticut, the suit claims that the nation’s biggest lenders conspired to fix, raise, and stabilize the prime rate charged to their most creditworthy customers for short-term loans.
The case, brought by plaintiffs represented by Scott + Scott Attorneys at Law LLP, says the alleged collusion not only affected borrowers paying prime-indexed interest rates directly, but also artificially inflated rates on loans tied to the Wall Street Journal Prime Rate, such as home equity lines of credit (HELOCs) and variable-rate credit cards.
According to the complaint, the defendants “participated in an agreement to set and fix their respective prime rates – and, as a result, WSJ Prime – at an artificial level,” maintaining those rates at roughly 300 basis points above the federal funds rate.
By coordinating their moves, the banks allegedly reaped billions in unlawful profits while ordinary consumers and small businesses paid higher interest on revolving credit and personal lending products.
The plaintiffs argue that the scheme distorted one of the most widely referenced benchmarks in consumer finance.
Says the complaint,
“Because Defendants knowingly and deliberately fixed their respective prime rates and WSJ Prime, their price-fixing agreement resulted in higher prices for Plaintiffs and the Classes.”
The case could have sweeping implications, as the WSJ Prime Rate underpins a massive volume of variable-rate loans across the U.S. economy. If the allegations are proven, it would mark one of the most significant collusion cases in American banking since the LIBOR manipulation scandal.
None of the defendant banks have yet commented publicly on the lawsuit, which seeks class-action status and damages for borrowers nationwide.
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