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Business 8th Edition by Marianne Jennings
Edition 8ISBN: 978-1285428710Business 8th Edition by Marianne Jennings
Edition 8ISBN: 978-1285428710 Exercise 6
The Introductory and Not-So-Annual Fees
Facts
In May 1999, Fled Bank sent Denise Roberts a credit card solicitation, encouraging her to apply for its new Titanium MasterCard."
the solicitation contained an introductory flyer, a solicitation letter, a "pre-qualified... invitation," and an initial disclosure statement The introductory flyer stated in two places that die credit card would have a "7.99% Fixed APR" for both purchase and balance transfers. The solicitation letter also stated that the card would offer a "7.99% Fixed APR." In two places, the letter claimed that the 7.99% APR was "NOT an Introductory rate," promising that "[i]t won't go up in just a few short months."
In order to obtain the Fleet credid can, Ms. Roberts had to complete the invitation form The front side of the form stated that the credit cant carried a "7.99% Fixed APR" On the back of the invitation, Fleet included the "TERMS OF PRF-QUAUFIED OFFER" and the "CONSUMER INFORMATION SECTION." The terms section stated that the terms of the credit card agreement were "subject to change" The consumer information section contained the so-called Schumer Box, which 1» the table of information required by TILA (see Exhibit 142 for an example of the Schumer Box), in a closed-end transaction. This box contained a column with the headings "Annual Percentage Rate (APR) for Purchases and Balance Transfers." The box beneath dial heading stated that "7,99% APR" was the applicable ate. Inside the box, Fleet listed two circumstances under which the rate could change (1) if the cardholder failed to meet repayment requirements or (2) if the account was closed. Fleet listed no other circumstances that would merit a rate change. The initial disclosure statement also stated that the APR for the card would be 7-99% and feted the same two conditions under which the rate could change.
Ms. Roberts completed and returned the invitation and in June 1999, she received her Fleet Titanium MasterCard, along with die cardholder agreement. Section 10 of this agreement indicated that the APR would be 7.99%. Section 24, however, stated that Fleet had "the right to change any terms of this agreement at any time." Thirteen months after she first obtained the card. Fleet sent Ms. Roberts a letter notifying her that Fleet would be increasing the APR on her Titanium MasterCard to 10.5%. Ms. Roberts and others filed a class action suit against Fleet for its violation of the TILA disclosure requirements for solicitation of credit card customers. The lower court entered summary judgment for Fleet, and Ms. Roberts appealed.
Judicial Opinion
FUENTES, Circuit Judge
In 1988, concerned that consumers were still not receiving accurate information about the potential costs of credit cards, Congress strengthened the TILA's protections for credit card consumers through enactment of the Fair Credit and Charge Card Disclosure Act, "a bill to provide for more detailed and uniform disclosure by credit and charge card issuers, at the time of application or solicitation, of information relating to interest rates and other costs which may be incurred by consumers through the use of any credit or charge card."
Prior to the passage of the Fair Credit and Charge Card Disclosure Act, the TTLA did not require issuers to provide such information until the consumer actually received the card. Congress decided that demanding early disclosure of relevant cost information from credit card companies would enable consumers to shop around for the best cards.
The TILA requires a credit card provider to disclose certain information in "direct mail applications and solicitations," including "annual percentage rates." The Board's regulations also require "[a] credit card issuer" to disclose the applicable "annual percentage rate." The TTLA requires that information described in 15 U.S.C. § 1637(c)(1)(A), such as "annual percentage rates," must be "clearly and conspicuously disclosed" in a "tabular format." Likewise, the Board's regulations mandate that disclosures required under 12 C.F.R. § 226.5a(b)(l) through (7) "be provided in a prominent location on or with an application or a solicitation, or other applicable document, and in the form of a table with headings, content, and format substantially similar to any of the applicable tables found in Appendix G."
Roberts asserts that Fleet failed to clearly and conspicuously inform consumers that the 7.99% APR was subject to change at any time. The IDS and the Schumer Box included in Fleet's solicitation materials stated only two conditions under which Fleet could raise Roberts' APR. A reasonable consumer could read this list as exhaustive and conclude that the 7.99% APR could be raised only under those two described circumstances. Construing the TILA strictly against the creditor and liberally in favor of the consumer, as we must, we believe that the TILA disclosures in this case, read in conjunction with the solicitation materials, present a material issue of fact as to whether Fleet clearly and conspicuously disclosed its right to change the APR. We therefore conclude that the District Court erred in granting summary judgment to Fleet on Roberts' TILA claim.
In the Schumer Box, Fleet stated that the 7.99% APR could change in the event of nonpayment or closure of the account. Fleet listed no other conditions under which the 7.99% APR could change.
…[t]he issue is not Fleet's obligation to disclose the change-in-terms provision, but its obligation to disclose the APR. Our inquiry focuses on whether Fleet's disclosures in the Schumer Box provided "an accurate representation of the legal obligation of the parties... when the relevant solicitation was mailed." As we explained above, we believe Roberts raised a question of material fact as to whether Fleet clearly and conspicuously provided an accurate representation of the APR.
Congress created the Schumer Box to assist consumers in accessing such information, not to shield credit card companies from liability for information placed outside of the Schumer Box. In its defense, Fleet relies on Paragraph 24 of the Cardholder Agreement that stages "[w]e have the right to change any of the terms of this Agreement at any time" This provision, however, foils to cure any of the TILA defects in the initial mailing. To begin with, Fleet only mails the Cardholder Agreement after a consumer has accepted the invitation. Thus, a consumer will not learn, until after the acceptance of the invitation, that the APR can be changed by Fleet at any time. Indeed, Fleet's practice of mailing the Cardholder Agreement containing important rate change information, after the consumer accepts the card, is contrary to the TILA mandate that credit card solicitations disclose all required information. Nonetheless, Fleet argues that it is prohibited from including "change in terms" information in the Schumer Box. However, as we previously stated, this argument avoids the central issue in this case, which is whether the APR was adequately disclosed. Additionally, we note that the "right to change" language in Paragraph 24 contradicts the statement in the introductory letter that this APR "won't go up in just a few short months."
Accordingly, we reverse the entry of summary judgment and remand for further proceedings.
What was different about the credit terms from what was in the Schumer Box?
Facts
In May 1999, Fled Bank sent Denise Roberts a credit card solicitation, encouraging her to apply for its new Titanium MasterCard."
the solicitation contained an introductory flyer, a solicitation letter, a "pre-qualified... invitation," and an initial disclosure statement The introductory flyer stated in two places that die credit card would have a "7.99% Fixed APR" for both purchase and balance transfers. The solicitation letter also stated that the card would offer a "7.99% Fixed APR." In two places, the letter claimed that the 7.99% APR was "NOT an Introductory rate," promising that "[i]t won't go up in just a few short months."
In order to obtain the Fleet credid can, Ms. Roberts had to complete the invitation form The front side of the form stated that the credit cant carried a "7.99% Fixed APR" On the back of the invitation, Fleet included the "TERMS OF PRF-QUAUFIED OFFER" and the "CONSUMER INFORMATION SECTION." The terms section stated that the terms of the credit card agreement were "subject to change" The consumer information section contained the so-called Schumer Box, which 1» the table of information required by TILA (see Exhibit 142 for an example of the Schumer Box), in a closed-end transaction. This box contained a column with the headings "Annual Percentage Rate (APR) for Purchases and Balance Transfers." The box beneath dial heading stated that "7,99% APR" was the applicable ate. Inside the box, Fleet listed two circumstances under which the rate could change (1) if the cardholder failed to meet repayment requirements or (2) if the account was closed. Fleet listed no other circumstances that would merit a rate change. The initial disclosure statement also stated that the APR for the card would be 7-99% and feted the same two conditions under which the rate could change.
Ms. Roberts completed and returned the invitation and in June 1999, she received her Fleet Titanium MasterCard, along with die cardholder agreement. Section 10 of this agreement indicated that the APR would be 7.99%. Section 24, however, stated that Fleet had "the right to change any terms of this agreement at any time." Thirteen months after she first obtained the card. Fleet sent Ms. Roberts a letter notifying her that Fleet would be increasing the APR on her Titanium MasterCard to 10.5%. Ms. Roberts and others filed a class action suit against Fleet for its violation of the TILA disclosure requirements for solicitation of credit card customers. The lower court entered summary judgment for Fleet, and Ms. Roberts appealed.
Judicial Opinion
FUENTES, Circuit Judge
In 1988, concerned that consumers were still not receiving accurate information about the potential costs of credit cards, Congress strengthened the TILA's protections for credit card consumers through enactment of the Fair Credit and Charge Card Disclosure Act, "a bill to provide for more detailed and uniform disclosure by credit and charge card issuers, at the time of application or solicitation, of information relating to interest rates and other costs which may be incurred by consumers through the use of any credit or charge card."
Prior to the passage of the Fair Credit and Charge Card Disclosure Act, the TTLA did not require issuers to provide such information until the consumer actually received the card. Congress decided that demanding early disclosure of relevant cost information from credit card companies would enable consumers to shop around for the best cards.
The TILA requires a credit card provider to disclose certain information in "direct mail applications and solicitations," including "annual percentage rates." The Board's regulations also require "[a] credit card issuer" to disclose the applicable "annual percentage rate." The TTLA requires that information described in 15 U.S.C. § 1637(c)(1)(A), such as "annual percentage rates," must be "clearly and conspicuously disclosed" in a "tabular format." Likewise, the Board's regulations mandate that disclosures required under 12 C.F.R. § 226.5a(b)(l) through (7) "be provided in a prominent location on or with an application or a solicitation, or other applicable document, and in the form of a table with headings, content, and format substantially similar to any of the applicable tables found in Appendix G."
Roberts asserts that Fleet failed to clearly and conspicuously inform consumers that the 7.99% APR was subject to change at any time. The IDS and the Schumer Box included in Fleet's solicitation materials stated only two conditions under which Fleet could raise Roberts' APR. A reasonable consumer could read this list as exhaustive and conclude that the 7.99% APR could be raised only under those two described circumstances. Construing the TILA strictly against the creditor and liberally in favor of the consumer, as we must, we believe that the TILA disclosures in this case, read in conjunction with the solicitation materials, present a material issue of fact as to whether Fleet clearly and conspicuously disclosed its right to change the APR. We therefore conclude that the District Court erred in granting summary judgment to Fleet on Roberts' TILA claim.
In the Schumer Box, Fleet stated that the 7.99% APR could change in the event of nonpayment or closure of the account. Fleet listed no other conditions under which the 7.99% APR could change.
…[t]he issue is not Fleet's obligation to disclose the change-in-terms provision, but its obligation to disclose the APR. Our inquiry focuses on whether Fleet's disclosures in the Schumer Box provided "an accurate representation of the legal obligation of the parties... when the relevant solicitation was mailed." As we explained above, we believe Roberts raised a question of material fact as to whether Fleet clearly and conspicuously provided an accurate representation of the APR.
Congress created the Schumer Box to assist consumers in accessing such information, not to shield credit card companies from liability for information placed outside of the Schumer Box. In its defense, Fleet relies on Paragraph 24 of the Cardholder Agreement that stages "[w]e have the right to change any of the terms of this Agreement at any time" This provision, however, foils to cure any of the TILA defects in the initial mailing. To begin with, Fleet only mails the Cardholder Agreement after a consumer has accepted the invitation. Thus, a consumer will not learn, until after the acceptance of the invitation, that the APR can be changed by Fleet at any time. Indeed, Fleet's practice of mailing the Cardholder Agreement containing important rate change information, after the consumer accepts the card, is contrary to the TILA mandate that credit card solicitations disclose all required information. Nonetheless, Fleet argues that it is prohibited from including "change in terms" information in the Schumer Box. However, as we previously stated, this argument avoids the central issue in this case, which is whether the APR was adequately disclosed. Additionally, we note that the "right to change" language in Paragraph 24 contradicts the statement in the introductory letter that this APR "won't go up in just a few short months."
Accordingly, we reverse the entry of summary judgment and remand for further proceedings.
What was different about the credit terms from what was in the Schumer Box?
Explanation
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The credit terms of the Schumer Box show...
Business 8th Edition by Marianne Jennings
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