U.S. Supreme Court rules cardholder not entitled to advance notice

By Correy Stephenson The Daily Record Newswire At the time of the transactions at issue, the Truth in Lending Act and Regulation Z did not require a credit card issuer to provide change-in-terms notice before increasing the interest rate, the U.S Supreme Court has ruled in an unanimous decision. The plaintiff sued Chase when his credit card interest rates were retroactively increased as a result of a late payment on his credit card account. He alleged that the rate hike violated the Truth in Lending Act and Regulation Z because Chase provided no notice of the increase until the following periodic statement, after it had taken effect. At the time, Regulation Z required creditors to disclose the circumstances under which rate hikes would be imposed, and to give notice at least 15 days prior to any rate increase. Chase argued that the initial disclosure statement given to the debtor stated that the rate would increase if payments were missed, and therefore both regulations were satisfied. A U.S. District Court dismissed the claim, but the 9th Circuit reversed, holding that a cause of action existed and reviving a putative class action against Chase. The justices granted certiorari after a subsequent holding from the 1st Circuit created a split in the circuits, and heard oral argument last December. In a decision authored by Justice Sonia Sotomayor, the justices reversed. Determining that Regulation Z was ambiguous, the Court turned to the Federal Reserve Board's interpretation of the regulation and concluded that deference was warranted. "The Board has made clear in the amicus brief it has submitted to this Court that, in the Board's view, Chase was not required to give [the plaintiff] notice of the interest rate increase under the version of Regulation Z applicable at the time," the Court said. Acknowledging the plaintiff's policy argument for the benefits of advance notice, the Court noted that Regulation Z has been updated as part of the 2009 Credit Card Accountability Responsibility and Disclosure Act. But "[t]hat Congress and the Board may currently hold such views does not mean, however, that deference is not warranted to the Board's different understanding of what the pre-2009 version of Regulation Z required," the justices said. Published: Mon, Jan 31, 2011

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