A federal lawsuit filed today in San Diego alleges Washington Mutual, now operating as a division of JP Morgan Chase Bank, has been systematically reducing and freezing customers' home equity credit lines.

The proposed class-action suit -- filed on behalf of Escondido businesswoman Michell Kimball -- alleges the bank used flawed automated valuation models to intentionally understate home values so it could create a pretext for freezing its customers' line-of-credit accounts.

The lawsuit alleges that the banks are failing to live up to their promises to use $700 billion in taxpayer funds to lend money to cash-strapped home and business owners and are squeezing consumers by freezing or reducing their home equity lines of credit.

Kimball said she first learned that Chase had frozen her WAMU credit line when a check she had drawn on the account was dishonored.

The plaintiff said the action by the bank threatened her home and the viability of her small business.

After Kimball's lawyers intervened, Chase restored her credit line but did not reimburse her for her losses, according to her court papers.