Chase Bank USA, N.A., v. McCoy
Issues
Under the pre-2009 version of Banking Regulation Z, are creditors required to give notice prior to implementing the right to increase interest rates upon cardholder default if that right was part of the initial disclosure of terms?
James McCoy alleges that Chase Bank (“Chase”) retroactively increased his credit card interest rate, without notice, in violation of the Truth in Lending Act’s Regulation Z. The Regulation has since been revised to require notice in this particular situation. McCoy argues that the plain language of Regulation Z mandated that he receive notice prior to an increase of his interest rate. Chase argues that the bank provided adequate notice. In support of its argument, Chase cites unofficial commentary promulgated by Federal Reserve Board, the agency which implements the Truth in Lending Act. The Supreme Court’s ruling will clarify the level of notice required prior to raising interest rates, and will provide advice on what sources may be used in interpreting complex statutes.
Questions as Framed for the Court by the Parties
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?
Respondent James McCoy filed suit in California federal court, alleging that Petitioner Chase Bank USA, N.A. (“Chase”) violated the Truth in Lending Act. See McCoy v.
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Additional Resources
· Wex: Consumer Credit
· Office of the Comptroller of the Currency: Truth in Lending Act – Comptroller’s Handbook
· Banking Law Prof Blog, Ann Graham: Can a Credit Card Issuer Increase a Customer’s Rate without a Change-in-Terms Notice? (Nov. 22, 2011)