In Barrer v. Chase Bank USA, the Ninth Circuit recently explained that disclosures in credit card agreements must be “clear and conspicuous” to comply with the Truth in Lending Act. The suit, filed in the District Court for Oregon, complained that Chase did not disclose that if a cardholder’s credit report revealed certain “risk factors” Chase could increase the cardholder’s Annual Percentage Rate. The complaint alleged that Chase raised plaintiffs’ APRs on their outstanding loan balances from 8.99% to 24.24% based on adverse information obtained by Chase from a credit report. The district court granted Chase’s motion to dismiss the class action complaint.
The Ninth Circuit reversed, explaining that, even if Chase could not know what the potential increased rate would be when it made its original disclosures, TILA still required Chase to “provide an explanation of the specific event or events that may result in the increased rate.” The court added that Regulation Z, which elaborates on TILA’s requirements, requires creditors to make disclosures “clearly and conspicuously.” It explained that “clear and conspicuous disclosures … are disclosures that a reasonable cardholder would notice and understand” and that although “[n]o particular kind of formatting is magical … the document must have made it clear to a reasonable cardholder that Chase was permitted under the agreement to raise the APR … for any reason at all.” Chase’s disclosures were not clear and conspicuous, the court concluded, because the change-in-terms provision of the agreement was “buried too deeply in the fine print” for a reasonable cardholder to realize that Chase could raise the APR for reasons other than those listed in the agreement. Accordingly, the circuit court found that plaintiffs had stated a claim and reversed the district court’s dismissal order.