Appellate Court Ruling Should Stand in Credit Card Notice Case
On Wednesday, in the U.S. Supreme Court, Public Citizen Litigation Group argued USA v. James A. McCoy. Public Citizen lawyer Greg Beck represents California resident James McCoy, who was surprised to find his credit card interest rate increased without warning, although he paid his credit card bill on time.
The case is a class-action challenge under the Truth In Lending Act (TILA) to Chase Bank's former practice of raising interest rates on credit card accounts without giving notice to customers. Chase claims 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. Under Chase's theory, a single late payment on an electricity or phone bill, for example, authorized Chase to increase a cardholder's interest rate, even if payments to Chase were made on time.
"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 cardholder 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. The new law requires banks to provide 45 days' notice of an APR increase and improves the transparency of credit card agreements so that consumers are better informed about the details of their contracts.
To read more about the case, click here .