9th Circuit Revives Claim on TILA Rate Disclosures
The Ninth Circuit last week reversed and remanded the dismissal of a credit card rate increase disclosure case in Barrer v. Chase Bank USA, NA.
In Barrer, plaintiffs had a Chase credit card. In February 2005, plaintiffs received a Change in Terms Notice from Chase, amending the terms of the cardholder agreement, including significantly increasing the applicable interest rate. Plaintiffs continued to use the card and the applicable interest rate increased within two months. Plaintiffs filed a putative class action complaint alleging Chase violated the Truth in Lending Act, 15 U.S.C. §1601 et seq., and Regulation Z, 12 C.F.R. §226. Plaintiffs claimed that Chase failed to disclose that it would increase the APR on the account based on information obtained from their credit report. The district court granted Chase's motion to dismiss and entered judgment for Chase. Plaintiffs appealed.
On appeal, the Ninth Circuit reversed and remanded, holding that plaintiffs had stated a claim under TILA because Chase could not show as a matter of law that the cardholder agreement made clear and conspicuous disclosures of the APRs that Chase was permitted to use.
The Court held that, contrary to plaintiffs' claims, neither TILA nor Regulation Z require disclosure of a card issuer's plan to raise the APR based on information in a cardholder's credit report. However, the Court held that sections 226.6(a)(2) and 226.5(a)(1) of Regulation Z requires "clear and conspicuous" disclosure of any APR that "may be used to compute the finance charge." Although Chase's change of terms notice disclosed the APRs that Chase was permitted to use, the Court held that the disclosure was not "clear and conspicuous" as a matter of law.
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