Consumer Law

Supreme Court to Hear Credit Card Case Tomorrow Morning

By Deepak Gupta

Tomorrow morning, the Supreme Court will hear Chase Bank USA v. James A. McCoy, a case involving the interpretation of consumer notice requirements imposed on banks under the federal Truth-in-Lending Act. Public Citizen attorney Greg Beck will argue on behalf of California resident James McCoy and others who were surprised to find their credit card interest rates increased without warning despite paying their credit card bills on time.

The case is about Chase Bank?s prior practice of increasing its credit card holders? annual percentage rate (APR) without giving notice to customers. Chase erroneously claimed that notice was not required because its consumer credit card agreements stipulated that Chase ?may? increase the initial rate ?up to? a specified maximum rate if its monthly customer credit review showed that a cardholder was late in making payments - to anyone.

Chase argues that a single late payment on an electricity or phone bill, for example, authorized Chase to increase the cardholder?s interest rate, even if payments to Chase were all on time. When he was hit with the increased APR, McCoy had already cancelled his credit card with Chase. He was paying off the balance on his closed account - on time - when he defaulted on a payment to a different creditor. 
 
The Chase contract was both unfair and prohibited by the terms of the Truth-in-Lending Act of 1968, Beck will tell the court. ?The problem with the bank?s argument is that it is in direct conflict with the purposes of TILA, which is to require disclosure of the specific interest rate that applies to their accounts,? Beck said. ?To allow banks to change the disclosed rate without notice would mean that many consumers would not know the rate at which they are accumulating debt.?
 
The act was strengthened last year when Congress passed the Credit Card Accountability, Responsibility and Disclosure Act (CARD) Act. In circumstances like McCoy?s, the new law requires the bank to provide 45 days? notice of an APR increase. The CARD Act further bolsters truth in lending by improving the transparency of credit card agreements so that consumers are better informed about the details of their contracts before they sign on the dotted line.  

Full post as published by CL&P Blog on December 07, 2010 (boomark / email).