Skip to main content

Search

Truth in Lending: 7.12.4 Protections Apply to All Types of Credit Cards, Including Telephone Cards

The credit card issuance restrictions in Regulation Z apply to all credit cards, even if they are issued for use in connection with otherwise exempt extensions of credit.1475 A 1984 amendment, aimed primarily at telephone credit cards, made this coverage clear.1476 Calling cards issued by a telephone company are subject to TILA’s issuance restrictions even if the user is merely allowed to defer payment until the monthly bill is received, rather than rolling over the balance from one

Truth in Lending: 7.12.5 Enforcement of the Prohibition Against Unsolicited Issuance

A creditor’s violation of TILA’s prohibition against unsolicited issuance of a credit card entitles a consumer to actual damages under section 1640(a).1480 It should also entitle the consumer to statutory damages.1481 If an unsolicited issuance claim is brought affirmatively, it is subject to TILA’s one-year statute of limitations.1482 A consumer unable to bring a TILA claim may be able to bring a state UDAP or common law claim.

Truth in Lending: 7.13.1 General

Some credit cards are issued by banks or other financial institutions which have a deposit account relationship with the card user.

Truth in Lending: 7.13.2.1 Consensual Security Interests

Regulation Z allows the card issuer to take a consensual security interest in the deposit account, and to enforce that interest.1502 But the security interest must be affirmatively agreed to by the consumer (boilerplate language should not suffice), be disclosed in the account-opening disclosures, and be taken and enforced only through procedures equally available to other creditors.1503 The official interpretations specify that the security interest may not be the functional equivalent of t

Truth in Lending: 7.14.1 General

The Truth in Lending Act includes some restrictions on the relationship between the card issuer, the cardholder, and the person or entity honoring the card (referred to herein as the merchant or seller, since that is most often the case).

Truth in Lending: 7.14.2 Tie-Ins

TILA provides that the card issuer may not require a seller to open an account or procure any service from the card issuer (or other person such as an affiliate, agent, or subsidiary) as a condition to participation in the credit card plan.1538 This flat prohibition is modified in Regulation Z, which allows the card issuer to mandate an account or service which is “essential to the operation of the credit card plan.”1539 For instance, if maintaining an account for clearing purposes is essent

Truth in Lending: 7.14.3 Prompt Crediting of Refunds

When a credit card has been used to purchase merchandise or services from a third-party seller, and the merchant accepts a return or otherwise forgives the debt, the merchant must transmit a credit to the card issuer within seven business days1540 through normal channels. The card issuer must then credit the consumer’s account as of a date within three business days from its receipt of the credit.

Truth in Lending: 7.14.4 Discounts and Surcharges

A merchant may allow a discount of any size from the regular price to induce payment by cash or check rather than by use of a charge or credit card.1545 The discount must be offered to all customers, and its availability must be clearly and conspicuously disclosed. If these conditions are met, the discount is not a finance charge.1546 If the conditions are not met, the discount is a finance charge which must be disclosed in advance.1547

Truth in Lending: 7.15.1 Record Retention Requirements

Open-end creditors and card issuers must keep evidence of their compliance with TILA’s disclosure and procedural requirements for two years.1563 This includes evidence as to compliance with such procedures as refunding credit balances and correcting adverse credit reports after billing error disputes.1564

Truth in Lending: 7.15.2 Treatment of Credit Balances

Creditors must refund any credit balances within seven business days1568 from receipt of a written request from the consumer.1569 This requirement also applies to closed-end credit accounts.1570 For open-end accounts, creditors must also appropriately identify credit balances on periodic statements.1571

Truth in Lending: 7.15.4.1 Reasonable Policies and Procedures Required

The Credit CARD Act requires credit card issuers to establish reasonable policies and procedures to enable estate administrators to determine the amount of a decedent’s credit card debt, and pay off the balance in a timely manner.1589 Such policies and procedures must be in writing.1590

Examples of reasonable policies and procedures include:

Truth in Lending: 7.15.4.2 Account Balance Disclosure Required

Upon an estate administrator’s request, the issuer must disclose the amount of the balance on a decedent consumer’s account in a timely manner.1598 The issuer’s disclosure is considered “timely” if it is made within thirty days of receiving the administrator’s request.1599

Truth in Lending: 7.15.4.3 Exemption for Joint Accounts

The protections for estate administrators do not apply with the decedent’s account if it is a joint account, and an account holder (presumably still living) remains on the account.1608 Thus, for joint accounts, the issuer is free to impose fees and charges after notice of the decedent’s death. However, if only an authorized user remains on the account, then a card issuer may not impose fees and charges.1609

Truth in Lending: E.2.3 Sample Complaint for HOEPA Rescission and Damages

The 2010 Dodd-Frank Act amendments changed the criteria for determining whether a loan is subject to HOEPA—modifying the APR trigger and points and fees trigger, and adding a third coverage trigger related to prepayment penalties. The Act also expanded the list of prohibited practices for HOEPA high-cost loans. These changes are discussed in Chapter 9, supra.

Truth in Lending: E.2.5 Sample Consumer Leasing Act Complaint

This sample complaint is adapted from a complaint drafted by Cary Flitter, a Pennsylvania attorney with a consumer law practice.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF PENNSYLVANIA

BRIAN S. SMITH, MICHAEL PARKER and MICHELLE PARKER, h/w on behalf of themselves and all others similarly situated

Plaintiffs

v.

NISSAN MOTOR ACCEPTANCE CORP.

Defendant

AMENDED COMPLAINT

I. INTRODUCTION

Truth in Lending: E.3.1.1 Introduction

Appendix E.3.1.2 includes a set of motion papers seeking a federal court temporary restraining order and preliminary injunction against non-judicial foreclosure of a consumer’s home, on the grounds of rescission. The papers were prepared by Hope Del Carlo when she was a staff attorney with the Oregon Law Center.

Truth in Lending: E.3.1.3 Plaintiff’s Declaration in Support of Motions for Temporary Restraining Order and Preliminary Injunction

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

[PLAINTIFF]

Plaintiff

v.

[Defendants 1–7]

Defendants

DECLARATION OF [PLAINTIFF] IN SUPPORT OF PLAINTIFF’S MOTIONS FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

I, [Plaintiff], hereby declare as follows:

1. I am the plaintiff in this case. I have personal knowledge of the facts set forth in this Declaration.