Term: 2010
Docket: 09-329
Chase Bank Usa, Na., Petitioner v. James A. Mccoy, Individually And On Behalf Of All Others Similarly Situated
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09-329 CHASE BANK USA, N.A. V. MCCOY DECISION BELOW: 559 F.3d 963 CERT. GRANTED 6/21/2010 QUESTION PRESENTED: The Federal Reserve Board's Regulation Z, which implements the Truth in Lending Act, requires creditors to provide an initial disclosure statement, before any transaction on an open-end credit plan takes place, containing "each periodic rate that may be used to compute the finance charge." 12 C.F.R. § 226.6(a)(2). Regulation Z also requires that when a creditor later changes any term that it was required to disclose in the initial disclosure statement, the creditor must "mail or deliver written notice" of that change in terms before the effective date of the change. 12 C.F.R. § 226.9(c). Credit card issuing banks generally provide the requisite initial disclosures in or with the contract document that governs the credit card account. Such cardholder agreements commonly specify a standard periodic rate of interest and also that, if the cardholder defaults in a certain manner, then the creditor may increase the periodic rate on the account up to an identified default rate. The question presented is: When a creditor increases the periodic rate on a credit card account in response to a cardholder default, pursuant to a default rate term that was disclosed in the contract governing the account, does Regulation Z, 12 C.F.R. § 226.9(c), require the creditor to provide the cardholder with a change-in-terms notice even though the contractual terms governing the account have not changed? LOWER COURT CASE NUMBER: 06-56278
In the case of Chase Bank USA, NA v. James A. McCoy (2010), the U.S Supreme Court ruled in favor of Chase Bank over a dispute regarding credit card interest rates. The plaintiff, James A. McCoy, had filed a class action lawsuit against Chase Bank on behalf of himself and others similarly situated, alleging that the bank failed to provide notice before increasing his credit card's interest rate due to delinquency or default as required by Regulation Z under the Truth in Lending Act (TILA). However, the court held that TILA and its implementing regulations did not require such advance notice for changes based on consumer default or delinquency because these were agreed upon terms between parties at account opening.
In the dissenting opinion for Chase Bank USA, NA., Petitioner v. James A. McCoy, Justice Scalia argued that the majority misinterpreted Regulation Z of the Truth in Lending Act (TILA). He contended that TILA does not require credit card companies to provide a change-in-terms notice before increasing an interest rate due to a customer's delinquency or default. The regulation only requires such notice when there are changes in terms not previously disclosed; however, these potential increases were already outlined in Chase’s initial agreement with customers and thus did not constitute undisclosed changes requiring additional notification under TILA. Therefore, he believed that Chase had complied fully with its legal obligations and should not be held liable for failing to give further notices about rate increases triggered by late payments or defaults.
