In October, 2010 the Supreme Court of the United States will hear the case of Chase Bank, NA v. James McCoy which was originally filed in 2006 and has been working its way through the court system having been appealed by Chase Bank, now JPMorgan Chase.
This case presents the question of whether the notice requirements of the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1615 and Regulation Z, 12 C.F.R. § 226, as interpreted by the Federal Reserve Board’s Official Staff Commentary, apply to discretionary interest rate increases that occur because of consumer default. We hold that Regulation Z requires a creditor to provide contemporaneous notice of such rate increases.FACTUAL AND PROCEDURAL BACKGROUND
James A. McCoy (“McCoy”) brought this action on behalf of himself and others similarly situated against Chase Manhattan Bank, USA, N.A. (“Chase”), a national bank located in Delaware. McCoy alleges that Chase increased his interest rates retroactively to the beginning of his payment cycle after his account was closed to new transactions as a result of a late payment to Chase or another creditor. McCoy claims that the rate increase violated TILA and Delaware law because Chase gave no notice of the increase until the following periodic statement, after it had already taken effect. The district court dismissed McCoy’s complaint with prejudice, holding that because Chase discloses the highest rate that could apply due to McCoy’s default in its cardmember agreement with McCoy (“Cardmember Agreement”), no notice was required. – Source
You can listen to the appeal and arguments by Chase and the attorney of Mr. McCoy. It’s actually pretty interesting. The attorney for Chase seems to get rattled.