"Credit Cardholders' Bill of Rights" is Back for 2009
The "Credit Cardholders' Bill of Rights" has been reintroduced for 2009 in the House as H.R. 627 (a similar bill has been introduced in the Senate as S.B. 235). The bill would make significant amendments to the Truth in Lending Act ("TILA") provisions governing issuance of consumer credit cards, including:
- requiring card issuers to give consumers 45 days notice of any interest rate increases;
- prohibiting card issuers from charging interest on debt that is paid during a grace period (so-called "double cycle billing);
- prohibiting card issuers from increasing rates retroactively on existing balances unrelated to a consumer's card account (so-called "universal default rate increase");
- requiring card issuers to mail billing statements 25 days before the due date and to consider timely any payment received before 5:00 p.m. on the due date;
- restricting terms that may be used in advertisements;
- requiring certain allocations of consumer payments; and
- limiting "over-the-limit" fees card issuers can charge consumers.
The House bill's sponsors note that recent Federal Reserve Rules would address many of the issues covered by the bill, but the Fed rules do not take effect until July 2010.
"Arbitration Fairness Act" Rises Again
The Arbitration Fairness Act of 2007 has been re-introduced as the Arbitration Fairness Act of 2009 (H.R. 1020). The 2009 version, the same text as the 2007 version, has been referred to the Subcommittee on Commercial and Administrative Law.
If passed in its current form, the bill would expressly invalidate arbitration agreements—retroactively—in employment, consumer, or franchise disputes and in any “dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.”
9th Circuit: Rate Increase After Default Requires Notice
In McCoy v. Chase Manhattan Bank, USA, N.A., the Ninth Circuit held that a credit card issuer's retroactive rate increase after a default requires contemporaneous notice to the consumer under the Truth in Lending Act, 15 U.S.C. §§ 1601-1615 ("TILA") and Regulation Z, 12 C.F.R. §226.
In McCoy, plaintiff alleged that credit card issuer Chase Manhattan Bank, USA, increased the interest rate on his card retroactively, without notice to him, after he made a late payment. Plaintiff sued Chase, alleging that the rate increase violated TILA and Delaware law. The district court dismissed plaintiff's claims with prejudice, holding Chase was not required to give notice because its cardholder agreement discloses the highest rate that could apply in the case of default. Plaintiff appealed.
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