Roberts v. Fleet Bank, 342 F.3d 260 (3d Cir. 2003).

The Third Circuit Court of Appeals held a credit card provider may have violated the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., by raising a credit card's interest rate after solicitation materials promised a fixed rate.

Here, Roberts received a packet of materials from a credit card company advertising a credit card with a fixed interest rate. The materials noted two specific circumstances that might cause the rate to change: (1) if the cardholder failed to repay or (2) the account was closed. Roberts obtained the card and received the company's "cardholder agreement" stating that it could change the terms of the agreement at any time. About one year later, the company raised the interest rate.

Roberts filed a class action against the company, alleging it violated TILA. The trial court granted defendant's motion to dismiss, finding that defendant had not violated TILA's disclosure requirements.

Reversing, the Third Circuit noted that the act's purpose is to assure a meaningful disclosure of credit terms to enable consumers to compare terms and protect against unfair credit card practices. The act requires credit card providers to clearly and conspicuously disclose-in a tabular format referred to as a Schumer Box-certain information in solicitations, including annual percentage rates.

The court noted that defendant, in the Schumer Box included in the solicitation materials, stated only that the percentage rate could change under two conditions. The court said it was at least as reasonable for a consumer to conclude from this information that the interest rate could be changed only under certain conditions as it would be to conclude defendant could change the interest rate at any time. Thus, plaintiff has raised a genuine issue of material fact as to the adequacy of defendant's disclosures.

The court rejected defendant's argument that the clear and conspicuous standard only applies to required disclosures in the initial disclosure statement and Schumer Box. When Congress decided to require credit card providers to disclose terms in a clear and conspicuous manner, it is doubtful it intended courts to ignore other statements made by issuers in their solicitation materials. Because the act's purpose is to ensure meaningful disclosures, it prohibits not only literal falsities but also misleading statements. Thus, although the court recognized that the clear and conspicuous standard only applies to required disclosures, it found that the act does permit consideration of materials outside of the Schumer Box in determining whether the provider disclosed the required information.

The court also rejected defendant's argument that the cardholder agreement gives it the right to change any terms of the agreement at any time. This provision fails to remedy the defects in the initial mailing, the court explained, because that agreement is only mailed after the consumer has accepted the offer. Therefore, a consumer will not learn until after acceptance that the rate can be changed at any time. Consequently, defendant's practice of mailing the agreement containing crucial rate change information only after the consumer accepts the offer is contrary to the TILA mandate that solicitations disclose all required information, the court concluded.

Plaintiffs' Counsel

Ira Neil Richards,

Gary M. Goldstein,

Roberta D. Liebenberg, and

Mary L. Russell, all of Philadelphia, Pa.

Marc H. Edelson, Doylestown, Pa.

Copyright Association of Trial Lawyers of America Dec 2003
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