562 U.S. 195 (2011), 09-329, Chase Bank USA, N.A. v. McCoy

Docket Nº:09-329
Citation:562 U.S. 195, 131 S.Ct. 871, 178 L.Ed.2d 716, 79 U.S.L.W. 4060
Opinion Judge:SOTOMAYOR, JUSTICE
Party Name:CHASE BANK USA, N.A., PETITIONER v. JAMES A. McCOY, individually and on behalf of all others similarly situated
Attorney:Seth P. Waxman argued the cause for petitioner Joseph R. Palmore argued the cause for the United States, as amicus curiae, by special of court. Gregory A. Beck argued the cause for respondent. Christopher R. Lipsett, Noah A. Levine, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, Seth P....
Judge Panel:SOTOMAYOR, J., delivered the opinion for a unanimous Court.
Case Date:January 24, 2011
Court:United States Supreme Court
 
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Page 195

562 U.S. 195 (2011)

131 S.Ct. 871, 178 L.Ed.2d 716, 79 U.S.L.W. 4060

CHASE BANK USA, N.A., PETITIONER

v.

JAMES A. McCOY, individually and on behalf of all others similarly situated

No. 09-329

United States Supreme Court

January 24, 2011

Argued December 8, 2010

Page 196

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

[178 L.Ed.2d 719] [131 S.Ct. 872] SYLLABUS [*]

Regulation Z-promulgated by the Federal Reserve Board (Board) pursuant to its authority under the Truth in Lending Act-requires credit card issuers to disclose certain information to cardholders. The version of the regulation in effect at the time this dispute arose obliges issuers to provide to cardholders an "[i]nitial disclosure statement, " 12 CFR §226.6, specifying "each periodic rate that may be used to compute the finance charge, " §226.6(a)(2). It also imposes "[s]ubsequent disclosure requirements, " §226.9, including notice to cardholders "[w]henever any term required to be disclosed under §226.6 is changed, " §226.9(c)(1). When "a periodic rate or other finance charge is increased because of the consumer's delinquency or default, " notice must be given "before the effective date of the change." Ibid.

At the time respondent McCoy filed suit, he was the holder of a credit card issued by petitioner Chase Bank. The cardholder agreement provided, in relevant part, that McCoy was eligible for "Preferred rates" as long as he met [131 S.Ct. 873]certain conditions. If any of those conditions were not met, Chase reserved the right to raise the rate, up to a pre-set maximum, and to apply the change to both existing and new balances. McCoy alleges that Chase increased his interest rate due to his delinquency or default and applied that increase retroactively, and that this action violated Regulation Z because Chase did not notify him of the increase until after it had taken effect. The District Court dismissed his complaint, holding that because the increase did not constitute a "change in terms" under §226.9(c), Chase was not required to notify him of the increase before implementing it. The Ninth Circuit reversed in relevant part, holding that Regulation Z requires issuers to provide notice of an interest-rate increase prior to its effective date.

Held:

At the time of the transactions at issue, Regulation Z did not require Chase to provide McCoy with a change-in-terms notice before implementing the agreement term allowing it to raise his interest rate, up to a pre-set maximum, following delinquency or default. Pp. 877 - 884, 178 L.Ed.2d, at 724-731.

(a) This case requires the Court to determine the meaning of a regulation promulgated by the Board under its statutory authority. However, Regulation Z's text is unclear with respect to the crucial interpretive question at issue: whether a change to an interest rate, pursuant to previously-disclosed contractual provision, constitutes a change to a "term required to be disclosed under §226.6" requiring a subsequent disclosure under §226.9(c)(1). Because of this ambiguity, the Court must look to the Board's own interpretation of the regulation for guidance in deciding this case. Pp. 877-880, 178 L.Ed.2d, at 724-727.

(b) The 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 regulation." Auer v. Robbins, 519 U.S. 452, 461, [178 L.Ed.2d 720] 117 S.Ct. 905, 137 L.Ed.2d 79 (internal quotation marks omitted). In Auer, the Court deferred to the Secretary of Labor's interpretation of his own regulation, presented in an amicus brief submitted by the agency at the Court's invitation. The Court held that the fact that the interpretation came in a legal brief did not, "in the circumstances of th[at] case, make it unworthy of deference." Id., at 462, 117 S.Ct. 905, 137 L.Ed.2d 79. The interpretation was "in no sense a post hoc rationalization advanced by an agency seeking to defend past agency action against attack, " ibid. (internal quotation marks and alteration omitted), and there was "no reason to suspect that the interpretation [did] not reflect the agency's fair and considered judgment on the matter in question, " ibid. The brief submitted by the Board here, at the Court's invitation, is no different. 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 [131 S.Ct. 874] to the interpretation in the agency amicus brief is warranted. Pp. 880 - 882, 178 L.Ed.2d, at 727-729.

(c) McCoy errs in arguing that deference to a legal brief is inappropriate because the interpretation of Regulation Z in the Official Staff Commentary commands a different result. While 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. Pp. 882-884, 178 L.Ed.2d, at 729-731.

559 F.3d 963, reversed and remanded.

Seth P. Waxman argued the cause for petitioner.

Joseph R. Palmore argued the cause for the United States, as amicus curiae, by special of court.

Gregory A. Beck argued the cause for respondent.

Christopher R. Lipsett, Noah A. Levine, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, Seth P. Waxman, Counsel of Record, Daniel S. Volchok, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for petitioner.

Barry L. Kramer, Los Angeles, CA, Gregory A. Beck, Counsel of Record, Deepak Gupta, Allison M. Zieve, Washington, DC, for respondent.

SOTOMAYOR, J., delivered the opinion for a unanimous Court.

OPINION

SOTOMAYOR, JUSTICE

Page 197

As applicable to this case, Regulation Z-promulgated by the Board of Governors of the Federal Reserve System (Board) pursuant to its authority under the Truth in Lending Act (TILA), 82 Stat. 146, 15 U.S.C. §1601 et seq.-requires that issuers of credit cards provide cardholders with an "[i]nitial disclosure statement" specifying, inter alia, "each periodic rate" associated with the account. 12 CFR §226.6(a)(2) (2008). The regulation also imposes "[s]ubsequent disclosure requirements, " including notice to cardholders "[w]henever any term required to be disclosed under §226.6 is changed." §226.9(c)(1). This case presents the question whether Regulation Z requires an issuer to notify a cardholder [178 L.Ed.2d 721] of an interest-rate increase instituted pursuant to a provision of the cardholder agreement giving the issuer discretion to increase the rate, up to a stated maximum, in the event of the cardholder's delinquency or default. We conclude that the version of Regulation Z applicable in this case does not require such notice.

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I

A

Congress passed TILA to promote consumers' "informed use of credit" by requiring "meaningful disclosure of credit terms, " 15 U.S.C. §1601(a), and granted the Board the authority to issue regulations to achieve TILA's purposes, §1604(a). Pursuant to this authority, the Board promulgated Regulation Z, which requires credit card issuers to disclose certain information to consumers.1 Two provisions [131 S.Ct. 875]of Regulation Z are at issue in this case. The first, 12 CFR §226.6, explains what information credit card issuers are obliged to provide to cardholders in the "[i]nitial disclosure statement, " including "each periodic rate that may be used to compute the finance charge." §226.6(a)(2). The second, §226.9, imposes upon issuers certain "[s]ubsequent disclosure requirements, " including a requirement to provide notice "[w]henever any term required to be disclosed under §226.6 is changed." §226.9(c)(1). As a general matter, notice of a change in terms has to be provided 15 days in advance of the effective date of the change. Ibid. When "a periodic rate or other finance charge is increased because of the consumer's delinquency or default, " however, notice only need be given "before the effective date of the change." Ibid. Regulation Z also explains that no notice is required under §226.9 when the change in terms "results from . . . the consumer's default or delinquency (other than an increase in the periodic rate or other finance charge)." §226.9(c)(2).

The official interpretation of Regulation Z (Official Staff Commentary or Commentary) promulgated by the Board explains these requirements further: Section 226.9(c)(1)'s

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notice-of-change requirement does not apply "if the specific change is set forth initially, such as . . . an increase that occurs when the consumer has been under an agreement to maintain a certain balance in a savings account in order to keep a particular rate and the account balance falls below the specified minimum." 12 CFR pt. 226, Supp. I, Comment 9(c)–1, p. 506 (2008) (hereinafter Comment 9(c)–1). On the other hand, the Commentary explains, "notice must be given if the contract allows the...

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