9th Circuit Defines Limits to FCBA Duties
The Ninth Circuit last week defined the limitations on a credit card issuer's duties to communicate with authorized card users regarding billing disputes. In Edwards v. Wells Fargo & Co., defendant Wells Fargo issued credit cards to Hamid and Saeid Maghamfar, two brothers, who were obligors on the account. The Maghamfars later added a third person, plaintiff Paul Edwards, as an authorized user of the account, and Wells Fargo issued a card to Edwards. Edwards had numerous disputes with vendors related to transactions on the card. Wells Fargo initially communicated with Edwards about the disputes, apparently believing he was an attorney for the Maghamfars. When Wells Fargo discovered that Edwards was not an attorney, just an authorized user, it stopped communicating with him, or responding to him, regarding the disputes.
Edwards sued Wells Fargo in district court in Nevada, alleging violations of the Fair Credit Billing Act ("FCBA"), part of the Truth in Lending Act, and violations of the Nevada Unfair Consumer Practices Act. The district court granted summary judgment for Wells Fargo. Plaintiff appealed.
The Ninth Circuit affirmed. The Court concluded that a card issuer does not owe a duty to communicate with a non-obligor on the account. The Court's analysis was complicated by the tension between definitions in the FCBA and in Regulation Z, its implementing regulation. Under the FCBA, a card issuer's duties run only to an "obligor" on the account. Since plaintiff did not assert he was an obligor, defendant would owe him no duty.
However, under Regulation Z, the billing dispute process is triggered by communication from a "consumer." Regulation Z defines "consumer" as a “cardholder or natural person to whom consumer credit is offered or extended.” After detailed analysis, the Court concluded that plaintiff is not a "consumer" under Regulation Z. Because plaintiff was neither an "obligor" under the FCBA nor a "consumer" under Regulation Z, Wells Fargo had not duty to respond to his billing disputes.
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