Rossman v. Fleet Bank (R.I.) Nat. Ass'n

• Decision Date: 08 February 2002
• Docket Number: No. 01-1094.,01-1094.
• Citation: 280 F.3d 384
• Parties: Paula E. ROSSMAN, individually and for all others similarly situated, v. FLEET BANK (R.I.) NATIONAL ASSOCIATION, a nationally chartered bank; Fleet Bank Credit Card Services, L.P., a Rhode Island limited partnership; Fleet Credit Card Holdings, Inc., a Delaware corporation; Fleetboston Financial Corporation, a Massachusetts corporation, Paula E. Rossman, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

280 F.3d 384

Paula E. ROSSMAN, individually and for all others similarly situated, v. FLEET BANK (R.I.) NATIONAL ASSOCIATION, a nationally chartered bank; Fleet Bank Credit Card Services, L.P., a Rhode Island limited partnership; Fleet Credit Card Holdings, Inc., a Delaware corporation; Fleetboston Financial Corporation, a Massachusetts corporation, Paula E. Rossman, Appellant.

No. 01-1094.

United States Court of Appeals, Third Circuit.

Argued September 5, 2001.

Filed February 8, 2002.

COPYRIGHT MATERIAL OMITTED

Michael D. Donovan, Donovan Searles, Philadelphia, PA, Michael P. Malakoff, Malakoff, Doyle & Finberg, Pittsburgh, PA, Attorneys for Appellant.

Burt M. Rublin, (Argued), Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, Attorney for Appellees.

Before: SCIRICA, ALITO and BARRY, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

In this Truth in Lending Act case, we must interpret the "no annual fee" provision of a credit card solicitation. Months after plaintiff Paula Rossman responded to a solicitation offering this term, defendant Fleet Bank changed the operable credit agreement and imposed an annual fee. Rossman brought this putative class action alleging, inter alia, that Fleet violated the TILA by failing to disclose the fee later imposed. The District Court dismissed plaintiff's TILA count for failing to state a claim upon which relief could be granted.¹ We will reverse and remand.

I.

In late 1999, plaintiff Paula Rossman received "Pre-Qualified Invitation" to obtain a credit card from defendant Fleet Bank.² The solicitation was for a "Fleet Platinum MasterCard" with a low annual percentage rate³ and "no annual fee." If interested, the recipient of this offer was to check a box next to which was written, "YES! I want the top card for genuine value and superior savings, the no-annual-fee Platinum MasterCard." An asterisk directed the recipient to a note that stated, "See the TERMS OF PRE QUALIFIED OFFER and CONSUMER INFORMATION for detailed rate and other information."

The enclosure entitled "Consumer Information" contained the "Schumer Box" — the table of basic credit card information that is required under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., as amended by the Fair Credit and Charge Card Disclosure Act of 1988. Within the Schumer Box, there was a column with the heading "Annual Fee"; the box beneath that heading contained only the word "None." On the "Consumer Information" enclosure, but outside the Schumer box, Fleet listed other fees. Also in that location was the statement, "We reserve the right to change the benefit features associated with your Card at any time."

Rossman responded to Fleet's offer, and soon thereafter received her "no-annual-fee Platinum MasterCard." It is unclear from her complaint and the documents in the record⁴ exactly when this occurred. It appears, however, that she received her card in December of 1999 or January of 2000. Along with the card, Rossman was sent Fleet's "Cardholder Agreement," which contained the following provision concerning annual fees: "No annual membership fee will be charged to your Account."

The Agreement provided for various applicable annual percentage rates charged on outstanding balances, including the standard rate for purchases (7.99%) and several higher rates that could be triggered by certain acts or omissions on the part of the cardholder. Among these was a rate of 24.99% that Fleet was entitled to impose "upon any closure of [the] Account." The Agreement also contained a change-in-terms provision, which stated:

We have the right to change any of the terms of this Agreement at any time. You will be given notice of a change as required by applicable law. Any change in terms governs your Account as of the effective date, and will, as permitted by law and at our option, apply both to transactions made on or after such date and to any outstanding Account balance.

In May 2000, Fleet sent a letter to plaintiff announcing its intention to change the terms of the agreement. That letter read, in part:

Over the past several months, the Federal Reserve has been steadily raising interest rates, making it difficult for credit card issuers to maintain products and services at current rates. While many experts predict that the Federal Reserve will continue to raise interest rates, the regular rate for purchases and balance transfers on your Fleet account remains at a fixed 7.99% APR.

While this rate remains unchanged, a $35 annual membership fee will apply to your account. Effective with billing cycles closing on or after June 1, 2000, the annual fee will appear beginning with your monthly statement that includes the next anniversary date of your account opening.

Soon thereafter, by letter dated June 20, 2000, Fleet announced a modification of its original change. Claiming the move was necessary in light of still further interest rate hikes by the Federal Reserve, Fleet modified the effective date of the change. Rather than waiting until the anniversary of plaintiff's account opening, Fleet notified Rossman that the annual fee would be imposed almost immediately:

We are modifying the terms of your Fleet Cardholder Agreement only to correct the timing of the annual membership fee previously disclosed. That fee will first be charged to your Account in your billing cycle that closes in July, 2000, and will be charged in that billing cycle each year thereafter.

A thirty-five-dollar fee was charged to Rossman's account by July 6, 2000, in accordance with the second letter.

Rossman alleges that despite Fleet's protestations that it had been effectively forced to cease offering the card without an annual fee, it continued to solicit other new customers with offers for no-annual-fee credit cards. Thus, she contends, Fleet systematically baited new customers with the no-annual-fee offer, while telling its existing customers that the fee increase was necessitated by changing market conditions. These "no annual fee" offers, Rossman alleges, were made by Fleet with the intention of imposing a fee shortly thereafter.

Rossman filed this putative class action on behalf of herself and "[a]ll persons who received or will receive an offer ... from Fleet ... for a no annual fee credit card, and who accepted that offer and who were then charged, or have been notified they will be charged, an annual fee."⁵ She asserts violations of the TILA and Rhode Island law: (1) violation of Rhode Island's Deceptive Trade Practices Act, R.I. Gen. Laws § 6-13.1-1 et seq.; (2) common law fraud; and (3) breach of contract. The essence of plaintiff's TILA claim is that the original solicitations, insofar as they described the credit card as one with no annual fee, violated the TILA's requirement of accurate disclosure.

Fleet moved to dismiss the TILA count, contending Rossman failed to state a proper claim. Granting the motion to dismiss, the District Court held Rossman's allegations did not state a deficiency in the original disclosures sufficient to constitute a violation under the TILA. Declining to exercise supplemental jurisdiction over the state law claims, the District Court dismissed the suit. Rossman appealed.

II.

The stated purpose of the Truth in Lending Act, which took effect in 1969, is "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. § 1601. In pursuit of these aims, the statute requires a series of disclosures that must be made before the consummation (the point at which legal obligations attach) of the underlying credit agreement, as well as at certain other specified times.

Congress included in the Act a provision expressly authorizing the Federal Reserve Board to "prescribe regulations to carry out the purposes of" the TILA. 15 U.S.C. § 1604. The Board promulgated "Regulation Z," 12 C.F.R. Pt. 226, for this purpose. It also published extensive "Official Staff Interpretations." 12 C.F.R. Pt. 226 Supp. I. "[T]he Supreme Court has emphasized the broad powers that Congress delegated to the Board to fill gaps in the statute" with these two devices. Ortiz v. Rental Mgmt., Inc., 65 F.3d 335, 339 (3d Cir.1995). "Unless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive...." Ford Motor Credit Co. v Milhollin, 444 U.S. 555, 565, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980).

Because the TILA is a remedial consumer protection statute, we have held it "should be construed liberally in favor of the consumer." Ramadan v. Chase Manhattan Corp., 156 F.3d 499, 502 (3d Cir. 1998); accord Begala v. PNC Bank, Ohio, N.A., 163 F.3d 948, 950 (6th Cir.1998) ("We have repeatedly stated that TILA is a remedial statute and, therefore, should be given a broad, liberal construction in favor of the consumer."); Fairley v. Turan-Foley Imps., Inc., 65 F.3d 475, 482 (5th Cir.1995) ("The TILA is to be enforced strictly against creditors and construed liberally in favor of consumers....").

In 1988, Congress determined the protections of the TILA with respect to credit and charge cards were inadequate to ensure sufficiently informed use of these credit devices. Congress enacted the "Fair Credit and Charge Card Disclosure Act,"⁶ which substantially strengthened the TILA's requirements with respect to credit cards. Significantly, for the first time, it imposed disclosure requirements on credit card applications and solicitations. The TILA now requires applications and solicitations to disclose the annual percentage rates, certain fees (including annual fees), the grace period for payments, and the balance calculation method. 16 U.S.C. § 1637. Before the amendment, the TILA required only that issuers make these disclosures before the opening of...