Skip to main content

Search

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: 11.3.2 Co-Obligors

In the usual case, the person seeking Truth in Lending remedies is a “consumer” who is the primary obligor in the credit transaction (for purposes of the right to rescind, the definition of consumer is expanded).236 However, liability arises when a creditor fails to comply with TILA requirements “with respect to any person.”237 “Person” is more broadly defined than “consumer” and includes a natural individual or an organization.238 The

Truth in Lending: 11.3.3 Forgery Victims

Two circuit courts have considered whether a consumer who is the victim of a creditor-committed forgery can pursue a TILA claim based on the forged document.

Truth in Lending: 11.2.2 The Supreme Court’s Decision in Spokeo v. Robins

In its 2016 decision, Spokeo, Inc. v. Robins,22 the Supreme Court for the first time addressed the issue of constitutional standing in a case under a chapter of the federal Consumer Credit Protection Act—the Act that includes TILA. The primary claim at issue was a violation of a requirement of the FCRA that consumer reporting agencies “follow reasonable procedures to assure maximum possible accuracy of” consumers’ reports.23

Truth in Lending: 11.2.3.6 Procedural vs. Substantive Requirements—Does It Make a Difference?

The Spokeo decision dwelt on a characterization of the case’s FCRA violations as merely “procedural.” Although the Spokeo Court did not clearly indicate the role of the distinction between procedural and substantive violations, many decisions have given meaning to this distinction, often by giving greater weight or conclusive weight to Congress’s judgment in enacting a statute that creates substantive protections and grants a private remedy for violations.72

Truth in Lending: 11.2.4.2.2 Violation of post-consummation disclosure requirements

TILA requires certain disclosures during the life of a contract, after consummation, such as when a mortgage loan is transferred, modified, or assumed, or when a consumer requests the identity of the loan holder.118 The creditor or servicer of a mortgage loan must also provide periodic statements, payoff statements, and escrow cancellation notices.119 A credit card issuer must provide: periodic statements; notice of the addition of new credit features; disclosures of changes in terms, th

Truth in Lending: 11.2.4.2.3 Mortgage payoff statements

Another example of a post-consummation disclosure is the payoff statement that a creditor must provide to a consumer in the mortgage loan context.126 When issuing the 2008 rule, the Federal Reserve Board described the harm that the payoff statement rule was designed to prevent: