JPMorgan Chase, Bank of America, Wells Fargo, and other major American financial institutions are facing a new class-action lawsuit, accused of conspiring to manipulate the prime lending rate in the United States for over three decades.
This allegedly led millions of consumers and small businesses to pay higher borrowing costs, as reported by Reuters.
The lawsuit, filed on Thursday in a federal court in Connecticut, alleges that eight major banks coordinated since 1994 to set lending rates at the same level as a benchmark published by The Wall Street Journal, known as the "WSJ Prime Rate" – fixed precisely at 3 percentage points above the federal funds rate.
This benchmark serves as a reference for trillions of dollars in loans, including credit cards and mortgage lines of credit.
The two plaintiffs, seeking class-action status to represent hundreds of thousands of debtors nationwide, claim they paid artificially high interest rates on loans indexed to the WSJ Prime Rate. Approximately 70% of consumer loans under one million dollars are tied to this index, according to the complaint.
"This alleged conspiracy affects millions of Americans trying to buy a home or access financing for a small business," said attorney Patrick McGahan, representing the plaintiffs.
JPMorgan, Bank of America, Wells Fargo, Citibank, and U.S. Bank declined to comment or did not respond to Reuters' requests.
The Wall Street Journal and its owner, Dow Jones, are not targeted in the lawsuit.
The complaint argues that until 1992, the newspaper published a range of "prime" interest rates – the lowest and highest rates offered by major banks – which encouraged competition. Currently, the WSJ Prime Rate is a single number resulting from the average rates of a group of banks.
The plaintiffs accuse the banks that, despite publicly claiming to independently set the "prime" rate based on various economic factors, in reality, "the reported interest rates are the result of an agreement to artificially fix rates."
An analysis of data from recent decades shows an almost perfect alignment among major banks, which, according to the complaint, makes it "impossible" for them to have acted independently.