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The issuance of a credit card is only an offer to extend credit, it does not create a contract.
Plaintiffs, Gary L. Blank and Sheldon Garber, purporting to represent a class of credit cardholders, brought the present action against defendants Harris Trust and Savings Bank (Harris Trust), Sears Roebuck and Co. (Sears), J. C. Penney Co., Inc. (Penney), and First National Bank of Chicago (FNB). The complaint alleged that plaintiffs were holders of credit cards issued by the defendants, and that defendants breached the provisions of its "cardholder agreement" document by changing the terms on which that defendant would offer to extend credit. According to plaintiffs, the alleged changes in the cardholder agreements were void for lack of consideration. In their prayer for relief, plaintiffs sought injunctive relief against the changes, money damages, and other relief. Defendants moved to dismiss the amended complaint. The trial court granted the banks' motions to dismiss. On appeal, plaintiffs asserted that the cardholder agreements between the defendant credit card issuers and the plaintiff credit cardholders were binding contracts to continue to extend credit on the same terms and that there was no consideration to support the alleged modifications.
Were the cardholder agreements between the plaintiffs and the defendants binding contracts to continue to extend credit on the same terms, thereby, making the grant of defendants’ motion to dismiss unwarranted?
The Court held that no contract was formed at the time of the issuance of the credit card, and that a separate contract was created each time the card was used according to the terms of the cardholder agreement at the time of such use. According to the Court, the cardholder agreements were subject to modification at will, and that in any event, consideration was given for the modifications. Therefore, the Court averred that the cause of action should have been dismissed on the pleadings because it clearly appeared that no set of facts could have been proved that would have entitled the cardholders to recover.