3rd Circuit Reinstates Claims Under Fair Credit Billing Act and Truth in Lending Act
The Third Circuit recently overturned a district court’s dismissal with prejudice of the Fair Credit Billing Act and the Truth in Lending Act claims against a large national bank. The Third Circuit held in its precedential opinion that the plaintiff adequately alleged FCBA and TILA claims over an unauthorized charge the bank removed from his bill but later reinstated.
As background, the plaintiff alleged in his complaint that he fell victim to a credit card scam and subsequently noticed a $657 charge on his bill. After verbally alerting the bank, it removed the charge and his next bill reflected a $657 credit. However, a month later, the charge was reinstated. Plaintiff sent the bank a written letter disputing the charge within 11 days of receiving the bill reflecting its reinstatement.
The FCBA requires a creditor to take certain steps to correct billing errors if a creditor receives written notice from a consumer within 60 days after the creditor transmits the disputed statement. The creditor must either make appropriate corrections or conduct an investigation and provide a written explanation setting forth the reasons why the disputed statement is correct.
For his first claim, the plaintiff alleged that he had timely submitted written notice of the $657 billing error and the bank violated the FCBA by neither crediting the charge nor conducting a reasonable investigation. The district court dismissed the claim as untimely, measuring the 60-day period for a written complaint from the first billing statement indicating the charge. The Third Circuit disagreed with the district court and held that the billing statement with the reinstated charge restarted the 60-day period. The plaintiff’s written complaint was, therefore, timely.
The Third Circuit justified its holding as consistent with both CFPB guidance and the remedial policies of the Act. Addressing when a creditor fails to send a billing statement containing a billing error, the CFPB considers the 60-day period beginning from “the time the statement should have been sent” but restarting when the statement reflecting the error is sent. Moreover, the court emphasized that a contrary ruling would be “antithetical” to Congress’ intention to reduce unfairness and confusion in credit markets. For example, a contrary ruling would allow creditors to avoid obligations under the Act by removing a charge, allowing a “reasonable consumer” to consider the matter resolved, and then reinstating the charge after the 60-day period has run.
The plaintiff’s second claim, under § 1643 of TILA, alleged the bank violated the Act’s limit of $50 for liability that can be imposed on the consumer when the bank “had reason to believe the charge was unauthorized.” The district court dismissed the claim on two grounds. First, the district court ruled that § 1643 does not provide a private right of action. The Third Circuit disagreed, holding that § 1640 provides a private right of action against an issuer that fails to comply with § 1643.
Next, the district court ruled that the plaintiff was seeking reimbursement for the $657 charge and the statute does not authorize this type of relief. Again, the Third Circuit disagreed with the district court’s analysis. The circuit court held that the plaintiff was not merely seeking reimbursement of the $657 charge, but actual damages—the full amount to compensate him for actual harm. Actual damages are available under § 1640. Consistent with its opinion, the Third Circuit remanded the case for further proceedings before the district court.
The opinion, Krieger v. Bank of America, is accessible here.
