SCOTUS to Hear Credit Card Rate Increase Case
The United States Supreme Court has agreed to review a class-action lawsuit brought against Chase Bank for changing credit-card interest rates without informing account holders who were late on payments by written notice. Chase appealed the case, Chase Bank USA v. McCoy, to the U.S. Supreme Court after a California federal court allowed the 2006 class-action lawsuit to proceed. The named plaintiff, James McCoy, accused Chase of violating the Truth in Lending Act when it raised his interest rates even after his account was closed due to being late on payments.
Chase believed that 2006 federal law did not require them to give notice of an increase in credit-card interest rates when a cardholder was late on a payment. They argued that the contracts that governed the agreement between Chase and the cardholders had language that specifically allowed Chase to raise interest rates when cardholders were late with payments or otherwise in default.
The decision in the case is expected to come after the Court opens its new session in October. The Court could allow financial penalties against Chase and require the reversal of interest rate increases made without proper notice. The impact will be restricted only to those who had their rates increased before 2009. That’s because as of last year, banks must give cardholders advance notice of rate increases due to default. The change came after the Federal Reserve Board amended the law last year and made it a requirement for banks to give advance notice for all rate increases, despite any language in the contracts between Chase and their cardholders.
- Court to Hear Chase Credit-Card Rate Case (WSJ)
- US high court to hear JPMorgan appeal in credit card case (AFP)
- Senate Passes Amendment on Credit Card Swipe Fees (FindLaw Free Enterprise Blog)
- Credit Counseling Requirement in Bankruptcy (provided by Harlow, Adams & Friedman, P.C.)
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