Court of Appeal Rejects UCL Action Based on Alleged TISA Violation
In Rose v. Bank of America, N.A. (2nd App. Dist., No. B230859, Nov. 21, 2011), the California Court of Appeal held that California's Unfair Competition Law (Bus. & Prof. Code §§ 17200, et seq., “UCL”) cannot be used to redress violations of the federal Truth in Savings Act (12 U.S.C. §§ 4301, et seq., “TISA”). Although TISA originally included a “private attorney general” provision allowing private plaintiffs to sue banks for alleged TISA violations, a sunset clause repealed the private right of action in 2001.
The Rose plaintiffs alleged that Bank of America failed to properly notify them of increased fees on their deposit accounts, in violation of TISA. They brought a single cause of action under the UCL, alleging unlawful and unfair business practices arising out of the alleged TISA violations. The trial court sustained Bank of America’s demurrer to the complaint, holding that Congress intended to bar a TISA private action and that the UCL cannot be used to plead around an absolute bar to relief. Plaintiff appealed.
The Court of Appeal affirmed the trial court, stating that Congress’ express repeal of a private right of action to enforce TISA precludes an indirect suit through the UCL. As a result, California consumers may not seek injunctive relief and restitution for “unlawful” conduct when they do not have standing to enforce compliance with TISA. The Court also held that the plaintiffs did not properly plead “unfair” business practices because the allegations in the complaint established that they had notice of the increased fees, a source to obtain additional information, and an opportunity to change banks before the changes took effect.
"Credit CARD Act" is Now Law
President Obama signed the "Credit Card Accountability, Responsibility, and Disclosure (CARD) Act" last week. The White House issued a fact sheet about the new law, previously known as the "Credit Cardholders' Bill of Rights."
The CARD Act includes significant amendments to Truth in Lending Act provisions related to interest rate increases, fees, and disclosures for credit card accounts. Highlights of specific provisions of the Act include the following provisions:
- Bans rate increases on existing balances due to "any time, any reason" or "universal default" and severely restricts retroactive rate increases due to late payment.
- Revises disclosure and duration of contract terms for the entirety of the first year: issuers may continue to offer promotional rates with new accounts or during the life of an account, but these rates must be clearly disclosed and last at least 6 months.
- Requires issuers to give card holders at least 21 calendar days from time of mailing to pay a monthly bill.
- Requires issuers to apply excess payments to the highest interest balance first.
- Bans practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.
- Requires Opt-In to Over-Limit Fees: issuers will have to obtain a consumer’s permission to process transactions that would place the account over the limit.
- Restricts fees on subprime, low-limit credit cards.
- Revises disclosure on fees for gift and stored value cards and restricts inactivity fees unless the card has been inactive for at least 12 months.
- Revises required disclosures of account terms to consumers before consumers open an account, and on statements of the activity on consumers’ accounts afterwards.
- Requires issuers to show “the consequences to consumers of their credit decisions.”
- Requires issuers to post contracts available on the Internet in a usable format.
- Requires regulators to report annually to the Congress on their enforcement of credit card protections
- Increases penalties on card issuers that violate these new restrictions.
- Requires card issuers and universities to disclose agreements with respect to the marketing or distribution of credit cards to students.
