NEW YORK—Some of the nation’s largest banks, including JPMorgan Chase, Wells Fargo, and Bank of America, are facing a new lawsuit that alleges they conspired to fix the U.S. prime interest rate for more than 30 years, resulting in inflated borrowing costs for consumers and small businesses.
The proposed class action, opens new tab, filed in federal court in Connecticut, claims that eight large banks have coordinated since at least 1994 to set their prime lending rates to match a benchmark published by The Wall Street Journal as the “WSJ Prime Rate” that is set at exactly three percentage points above the federal funds rate, Reuters reported.
The suit notes the WSJ Prime Rate serves as a benchmark for trillions of dollars in consumer and small-business loans, including credit cards and home equity lines of credit.
About the Class
The two consumer plaintiffs, who are seeking to represent an estimated class of hundreds of thousands of borrowers nationwide, claim they paid artificially inflated interest on loans indexed to the WSJ Prime Rate, Reuters reported. The lawsuit states that about 70% of all consumer loans for amounts under $1 million are indexed to the rate.
JPMorgan, Bank of America Wells Fargo and other defendants including Citibank and U.S. Bank either declined to comment or did not immediately respond to a request for one.
The Wall Street Journal and its publisher Dow Jones are not named as defendants in the lawsuit. Dow Jones did not immediately respond to a request for comment, Reuters said.
Public Statements Cited
“Up until 1992, according to the complaint, the Journal published a range of prime rates, including the lowest and highest rates from large banks, which the lawsuit said fostered competition among banks,” Reuters said. “The WSJ Prime is now a single number, derived from a group of banks.
The lawsuit disputes public statements from the banks that they independently set their own prime rate based on a number of factors.
“Despite publicly stating otherwise, defendants’ reported prime rates are the product of an agreement to fix rates,” the lawsuit said.
The lawsuit further alleges that years of data showing near-perfect alignment in prime rate pricing among the banks makes it “impossible” they were acting independently, according to Reuters.
