Green’s Dictionary of Slang

chats n.2

also chatts, chits
[SE chattels, moveable property, typically livestock, ‘lice being the chief livestock of beggars, gypsies, and the rest of the canting crew’ (Grose, 1785)]

[late 17C–1910s] (UK Und.) lice; thus chat parade, a delousing session.

In compounds

chat-bags (n.) [bags n.2 ; the infestation of lice during WWI ]

[1910s] (Aus.) underwear.