The U.S. Court of Appeals for the Tenth Circuit recently held that a consumer had no claim under the federal Fair Credit Billing Act (FCBA) where he had already fully paid the balance of his credit cards, because after full payment there was no “credit outstanding.”

A copy of the opinion is available at:  Link to Opinion.

The plaintiff consumer used a credit card from a bank (“Bank One”) to pay $689,176.92 to a company for the future delivery of wine.  The consumer used another credit card from another bank (“Bank Two”) to pay $379,153.72 to the same company for the future delivery of wine.  The consumer ultimately did not receive the wine from the wine company, which declared bankruptcy.

The consumer asked both banks to refund his accounts for the undelivered wine under section 1666i of the FCBA.  Bank One complied in part and credited the consumer’s account $100,136.88, but Bank Two refused.  The consumer then filed a lawsuit against each company, seeking $589,040.04 from Bank One and $379,153.72 from Bank Two.

Bank One and Bank Two each filed a motion to dismiss, arguing primarily that because the consumer had fully paid the balance on his credit cards, he had no claim under the FCBA, 15 U.S.C. § 1666i.  The trial court in Bank One’s case ruled first, agreeing with its interpretation of section 1666i, and dismissed the case.  The trial court in Bank Two’s case adopted the reasoning of the earlier decision and dismissed this action as well.  The consumer appealed and the cases were consolidated.

On appeal, the Tenth Circuit analyzed section 1666i of the FCBA, which the Court noted has two sections.  “The first makes credit-card users ‘subject to all claims (other than tort claims) and defenses arising out of any transaction in which the credit card is used as a method of payment or extension of credit.’”  15 U.S.C. § 1661i(a).  The first section is “[s]ubject to the limitation contained in subsection (b).”  Id.

“[S]ubsection (b) limits the amounts of a cardholder’s claims or defenses to ‘the amount of credit outstanding with respect to [the disputed] transaction at the time the cardholder first notifies the card issuer . . . of such claim or defense.’”  15 U.S.C. § 1661i(a).

The Tenth Circuit stated: “This case turns on this limitation – specifically, on the meaning of ‘credit outstanding.’”  To determine the meaning of the word, the Court first looked to the statute, which defines “credit” as “the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.”  15 U.S.C. § 1602(f).

The Court noted that the FCBA does not define “outstanding,” but that according to Black’s Law Dictionary it is an adjective meaning “[u]npaid” or “uncollected.”  Thus, “’the amount of credit outstanding’ is the amount of credit extended by the card issuer that the cardholder hasn’t yet paid back.  Stated differently, a cardholder’s claim under § 1666i is limited to whatever amount of the debt remains unpaid.”

Having determined the meaning of “credit outstanding,” the Court next looked to the facts of the case.  There, the consumer alleged in his complaint that he had paid both Bank One and Bank Two in full for the wine purchases.  Thus, “there was no ‘credit outstanding’ related to the wine purchases.  And because recovery under § 1666i is limited to the ‘amount of credit outstanding,’ [the consumer] could recover nothing under that statute.”

Because the Tenth Circuit decided the consumer’s claims on these grounds, it did not address his argument that section 1666i(a) creates an affirmative right of action for cardholders against card issuers, because even assuming the right exists, the consumer had no claim.

The Tenth Circuit therefore affirmed the ruling of the trial court dismissing the consumer’s claims.