The Lawletter Vol 40 No 1
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "Credit CARD Act of 2009"), Pub. L. No. 111-24, 123 Stat. 1734, H.R. 627 (2009), amended the Federal Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq., by specifically requiring banks to make additional disclosures to consumers regarding their credit cards. These included disclosures prior to renewal of a credit card, 15 U.S.C. § 1637(d)(1), and disclosures when the creditor makes changes to the terms and notices, as well as advertising disclosures. Additional consumer regulations were later promulgated under the Credit CARD Act of 2009. In August 2010, regulations became effective that provided that if a card issuer prospectively changes the annual percentage rate ("APR") on the card based on certain factors, the card issuer must also apply the same factors to determine whether a reduction in the APR is proper. See 12 C.F.R. §§ 226.52(b), 226.59. Importantly, these regulations also require that a card issuer can assess penalty fees for late payments only in such a way as represents a "reasonable proportion of the total costs incurred by the card issuer." Id. § 226.52(b)(1)(i).
These and other credit card disclosure requirements have been the subject of litigation since their effective dates. Recently, in In re Capital One Bank Credit Card Interest Rate Litigation, No. 1:10-md-02171-TWT, MDL No. 2171, 2014 WL 4925647 (N.D. Ga. as corrected Nov. 3, 2014), the federal court granted the bank's motion for summary judgment in a class action brought against it by credit cardholders alleging violations of both the federal TILA and state consumer protection laws. The court ruled in favor of the bank's ability to periodically change interest rates without violating the state law implied covenant of good faith and fair dealing. The court also ruled in favor of the bank regarding its failure to timely provide credit cardholders with a notice of the increase in interest rates that is now required under TILA as discussed above. The court held that despite the bank's practice of contracting out this obligation to a third party and despite the gross inadequacies in the mailing effort, so long as there was some record of the mailings' having been sent, even though they were never received, TILA was satisfied.
While the Credit CARD Act of 2009 was intended to protect consumers from aggressive tactics by credit card issuers, the expanded disclosure requirements and regulations may not have the punch they were intended to have if the federal courts dilute their effectiveness as the Georgia court did in the recent Capital One class action case.