WASHINGTON, D.C. --
U.S. Supreme Court on Jan. 24
unanimously ruled that a credit card holder was not entitled to prior notice
before his card issuer raised his annual percentage rate (APR) because it was
not required to give notice under federal law (Chase Bank USA, N.A. v. James
A. McCoy, et al., No. 09-329, U.S. Sup.).
The Supreme Court held that Chase Bank USA, N.A. did not violate
the Truth in Lending Act (TILA) when it raised cardholder James A. McCoy's APR
because under the terms of the Federal Reserve Board's amendment to its
Regulation Z, no prior notice is required since the raise was due to McCoy's
delinquent payment history and not a "change in terms."
Writing for the court, Justice Sonia Sotomayor cited the court's
ruling in Auer v. Robbins (519 U.S. 452, 461 ). The court
found that "[t]he Board has made clear in its amicus brief to this Court that,
in its view, Chase was not required to give McCoy notice of the interest rate
increase under the applicable version of Regulation Z. This Court defers
to an agency's interpretation of its own regulation, advanced in a legal brief,
unless that interpretation is 'plainly erroneous or inconsistent with the
"As in Auer, there is no reason to believe that the
Board's interpretation is a 'post hoc rationalization' taken as a litigation
position, for the Board is not a party to this case. And its
interpretation is neither 'plainly erroneous' nor 'inconsistent with' the
indeterminate text of Regulation Z. Thus, there is no reason to suspect
that the Board's position in its amicus brief reflects anything other than its
fair and considered judgment as to what the regulation required at the time
this dispute arose. That Congress and the Board may currently hold a
different view does not mean that deference is not warranted to the Board's
understanding of what the applicable version of Regulation Z required.
Under Auer, therefore, it is clear that deference to the interpretation in the
agency amicus brief is warranted," Justice Sotomayor said.
Justice Sotomayor also said that McCoy's argument that deference
to the board's legal brief is inapposite "because the interpretation of
Regulation Z in the Official Staff Commentary commands a different result"
fails, explaining that "[w]hile Commentary promulgated by the Board as an
interpretation of Regulation Z may warrant deference as a general matter, the
Commentary explaining the requirements at issue in this case largely replicates
the ambiguity present in the regulatory text, and therefore offers no reason to
disregard the interpretation advanced in the Board's amicus brief."
McCoy sued Chase in the U.S. District Court for the Central
District of California on behalf of himself and others similarly
situated. He alleges that Chase violated TILA "by raising the interest
rates of members of the putative class, without providing advance notice of the
increases, after class members made late payments to [Chase] or another
The District Court granted Chase's motion to dismiss, and McCoy
appealed to the Ninth Circuit U.S. Court of Appeals, which reversed in a split
opinion. Chase then appealed to the Supreme Court, which invited acting
U.S. Solicitor General Neal Kumar Katyal to express the view of the United
The Supreme Court heard oral argument in the action on Dec. 8.
Katyal filed an amicus brief on May 24, and the Supreme Court
granted certiorari on June 21. The American Bankers Association filed a
brief as amicus curiae on behalf of Chase on Sept. 1.
[Editor's Note: Full
coverage will be in the January 2011 issue of the LexisNexis Financial Services
Litigation Report. In the meantime, the opinion is available at www.mealeysonline.com
or by calling the Customer Support Department at 1-800-833-9844.
Document #88-110125-036Z. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
- Document #88-110125-036Z
For more information, call
editor Timothy J. Raub at 215-988-7740, or e-mail him at firstname.lastname@example.org.