Imposition of credit card fee shortly after promise of "no annual fee" in solicitation materials violates Truth in Lending Act

Law Reporter, Jun 2002

Imposition of credit card fee shortly after promise of "no annual fee" in solicitation materials violates Truth in Lending Act.

Rossman v. Fleet Bank (R.I.) Nat'l Ass'n, 280 F.3d 384 (3d Cir. 2002).

The Third Circuit Court of Appeals held that a promise in a credit card solicitation that the card has "no annual fee," made by a creditor that intends to impose such a fee shortly thereafter, is misleading and unlawful.

Here, Rossman responded to a solicitation offering her a credit card at no annual fee. A few months later, the bank changed the underlying credit agreement and imposed an annual fee. Rossman filed a class action lawsuit alleging, among other things, that the bank violated the Truth in Lending Act (TILA), 15 U.S.C. 16 1601 et seq., by failing to disclose the fee at the time she acquired her card. A U.S. district court dismissed the TILA count for failing to state a claim upon which relief could be granted.

Reversing, the Third Circuit found that a reasonable consumer would expect that, even if the terms of a credit card agreement are subject to change, the stated terms in the initial solicitation and agreement are those that the card issuer intends to provide for at least one year.

The court explained that Congress, in enacting the TILA, imposed special requirements on credit card solicitations. Not only must issuers disclose the basic terms of the agreement prior to consummation of the contract, they must also disclose-"clearly, conspicuously, and accurately"-many of those terms in the solicitation itself. Congress was seeking to ensure that consumers have the information needed to make informed choices with respect to credit cards, not only before the agreement is consummated, but also at the point at which they are considering responding to an issuer's solicitation, the court said.

Under defendant's approach, the court observed, a credit card issuer would be able to promise any terms it wanted, with no intention of offering those terms. It could send, together with the card, a new set of disclosures stating the terms it had always actually intended to provide. Because so many credit solicitations include introductory rates and fees, it is reasonable to view a solicitation that promises fixed rates and no annual fees as describing an agreement under which the issuer intends to offer those terms until there is a reason to change them, the court found.

Consequently, the court remanded.

Plaintiff's Counsel

*Michael D. Donovan, Philadelphia, Pa. Michael P. Malakoff, Pittsburgh, Pa.