2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-29-2002

Schnall v. Amboy Natl Bank

Precedential or Non-Precedential:

Docket 1-1502

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Recommended Citation

"Schnall v. Amboy Natl Bank" (2002). 2002 Decisions. Paper 52.

http://digitalcommons.law.villanova.edu/thirdcircuit_2002/52
Filed January 28, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 01-1502 

MARTIN SCHNALL, individually and on behalf 

of all others Similarly Situated, Appellant 

v. 

AMBOY NATIONAL BANK 

On Appeal From the United States District Court 

For the District of New Jersey 

(D.C. Civ. No. 99-cv-04908) 

District Judge: Honorable Katharine S. Hayden 

Argued: November 6, 2001 

Before: BECKER, Chief Judge, McKEE and 

RENDELL Circuit Judges. 

(Filed: January 28, 2002) 

 STUART A. BLANDER, ESQUIRE 

 (ARGUED) 

 Alan A. Heller, Esquire 

 Heller, Horowitz & Feit, P.C. 

 292 Madison Avenue 

 New York, NY 10017 

 ABE RAPPAPORT, ESQUIRE 

 David Kessler & Associates, L.L.C. 

 1373 Broad Street 

 Clifton, NJ 07013 

 Counsel for Appellant 
 DENNIS T. KEARNEY, ESQUIRE 

 (ARGUED) 

 HELEN A. NAU, ESQUIRE 

 Pitney, Hardin, Kipp & Szuch, LLP 

 P.O. Box 1945 

 Morristown, NJ 07962-1945 

 Counsel for Appellee 

 DOLORES S. SMITH, ESQUIRE 

 Director 

 Board of Governors of the Federal 

 Reserve System 

 Division of Consumer and 

 Community Affairs 

 Washington, DC 20551 

 Counsel for Amicus Curiae at the 

 Invitation of the Court 

OPINION OF THE COURT 

BECKER, Chief Judge. 

In this putative class action, plaintiff Martin Schnall 

alleges that the newspaper advertisements and account 

disclosures of defendant Amboy National Bank ("the Bank") 

violated the Truth in Savings Act ("TISA"), 12 U.S.C. 

SS 4301-13, and regulations promulgated by the Federal 

Reserve Board pursuant to the Act. In particular, Schnall 

contends that the Bank failed to calculate the advertised 

annual percentage yield ("APY") on its money market

savings accounts according to the methods prescribed by 

the regulations and required by the statute. The District 

Court granted summary judgment for the Bank, holding 

that the advertisements and disclosures at issue did not 

violate TISA or the relevant regulations, and that even if 

they did, Schnall had failed to show that he was misled by 

the advertised rates. Schnall appeals, and we reverse, 

holding that the advertisements and disclosures at issue 

violated TISA and the Act's implementing regulations. This 

holding is buttressed by the letter-brief of the Federal 

 2 
Reserve Board of Governors, amicus curiae at the request 

of the Court, which endorses this position. 

Schnall brought this suit pursuant to 12 U.S.C.S 4310, 

which has since been repealed. See infra note 2. This 

section created a private cause of action for TISA violations, 

and provided for actual damages as well as statutory 

damages of between $100 and $1,000 in an individual

action and "such amount as the court may allow" in a class 

action. See 12 U.S.C. S 4310. The Bank contends that even 

if there was a violation, Schnall may not recover statutory 

damages because he failed to establish that he was misled 

by or relied on the advertised rates or that he was

financially harmed by the TISA violation. However, we hold 

that TISA imposes strict liability on depository institutions 

that violate its disclosure requirements, and that to recover 

statutory damages under S 4310, a plaintiff need not show 

that he relied to his detriment on the advertised APY, that 

he was misled by the advertised APY, or that he was

financially harmed by the TISA violations. We therefore 

conclude that Schnall is entitled to partial summary 

judgment on the question of liability and will remand for a 

determination of damages. 

I. 

At various times between October 18, 1998 and October 

10, 1999, the Bank placed in the Newark Star-Ledger a 

number of substantially identical advertisements promoting 

its Money Market Accounts. In bold letters and large 

typeface, these advertisements offered "a 3-month bonus of 

6.00% APY." In smaller print, the advertisements stated 

that "[a]fter the bonus your yield is based on the 3-month 

Treasury Bill. Plus, we'll guarantee that the yield will 

always be higher than the combined average yield offered 

by the 3 largest NJ banks." The advertisements also set 

forth the APY that the accounts had earned during the 

previous year. 

Consumers who called the phone number listed on the

advertisements would receive from the Bank an application 

and Disclosure of Account Terms and Fees ("account 

disclosure"), which stated the APY in the same manner as 

 3 
the advertisements. In particular, the account disclosure 

stated that an APY of 6% would apply for a period of 90 

days from the date the account is opened. After that, "the 

Interest Rate paid on your account is based on the 3-month 

Treasury Bill and is guaranteed to be at least 1.00% higher 

than the average money market account yields of First 

Union/NJ, PNC Bank/NJ and Summit Bank as of the last 

business day of the previous month." 

On October 16, 1998, before any of the advertisements at 

issue had been published, Schnall called the Bank to 

request an account application. On October 26, 1998, after 

seeing the advertisements described above, Schnall again 

phoned the Bank to request an application. The Bank sent 

Schnall an account disclosure and application, which he 

executed and returned, together with a check for $20,000 

to open the advertised account. On or about October 28, 

1998, the Bank received Schnall's application and check, 

and opened a Money Market Account in his name. 

On October 18, 1999, Schnall filed this action on behalf 

of himself and a putative class of all persons who had 

deposited at least $20,000 into a Money Market Account 

with the Bank during the period from October 18, 1998 to 

October 18, 1999. The complaint alleged that the APY that 

appeared in the Bank's advertisements and account 

disclosures failed to comply with the required method of 

calculating the advertised APY under TISA and its 

implementing regulations. In particular, Schnall contends 

that under the regulations, the Bank may not advertise a 

6% APY for the first three months and a variable rate APY 

for the remainder of the account term. Rather, in Schnall's 

submission, the regulations require the Bank to advertise a 

single "blended," or "composite," APY that represents the 

total yield on the account over a term of one year.

According to Schnall, the regulations require this blended 

APY to be computed by applying the introductory rate for 

the first three months and applying whatever the variable 

rate was at the time of the advertisements for the remaining 

nine months, even though the resulting blended APY, which 

the Bank is required to advertise, may differ from the 

actual APY at the end of the year, depending on whether 

the variable rate changes. 

 4 
The District Court granted the Bank's motion for 

summary judgment and denied Schnall's cross-motion for 

partial summary judgment. In an oral opinion, the Court 

held that because the variable rate on the accounts is a 

function of both the 3-month Treasury Bill as well as the 

APY of three other banks, the requirement that 

advertisements disclose the APY as a single blended rate 

was inapplicable, and the advertisements therefore 

complied with TISA. The Court further concluded that even 

if the Bank's advertisements and account disclosures 

violated TISA, summary judgment in favor of the Bank was 

appropriate because Schnall had failed to produce 

sufficient evidence that he relied to his detriment on the 

advertised APY. 

The District Court had subject matter jurisdiction 

pursuant to 12 U.S.C. S 4310(e) and 28 U.S.C.S 1331, and 

this Court has appellate jurisdiction pursuant to 28 U.S.C. 

S 1291. We review de novo the District Court's disposition 

of the parties' cross-motions for summary judgment, see 

Woodside v. School Dist. of Philadelphia Bd. of Educ., 248 

F.3d 129, 130 (3d Cir. 2001), under the familiar standard 

set forth in the margin.1 We turn first to whether the 

advertisements and disclosures in question violated TISA 

and the implementing regulations, and then address 

whether TISA imposes strict liability on depository

institutions that violate its disclosure requirements or 

whether a plaintiff must also establish reliance or some 

form of financial injury. 

II. 

Schnall commenced this suit pursuant to a now-repealed 

provision of TISA, which created a private right of action 

_________________________________________________________________ 

1. Summary judgment is proper if there is no genuine issue of material 

fact and if, viewing the facts in the light most favorable to the nonmoving party, the moving party is entitled to judgment as a matter of 

law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317 

(1986). The judge's function at the summary judgment stage is not to 

weigh the evidence and determine the truth of the matter, but to 

determine whether there is a genuine issue for trial. See Anderson v. 

Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). 

 5 
against "any depository institution which fails to comply 

with any requirement imposed under this chapter or any 

regulation prescribed under this chapter . . . ." 12 U.S.C. 

S 4310(a).2 Thus, Schnall may establish liability by showing 

that the Bank's advertisements and account disclosures 

_________________________________________________________________ 

2. Section 4310 was repealed as of September 30, 2001. See Act of Sept. 

30, 1996, Pub. L. 104-208, S 2604(a), 110 Stat. 3009, 3009-470 (1996) 

("Effective as of the end of the 5-year period beginning on the date of 

the 

enactment of this Act [September 30, 1996], section 271 of the Truth in 

Savings Act (12 U.S.C. S 4310) is repealed."). Although private parties 

may no longer sue for violations of TISA, the Federal Reserve Board 

retains authority to enforce compliance. See 12 U.S.C. S 4309. 

The Bank does not argue that S 4310 is inapplicable to this action, 

which was filed before S 4310 was repealed, and we believe that 

pursuant to 1 U.S.C. S 109, Schnall's action survives the repeal. Section 

109 provides that "[t]he repeal of any statute shall not have the effect 

to 

release or extinguish any . . . liability incurred under such statute, 

unless the repealing Act shall so expressly provide, and such statute 

shall be treated as still remaining in force for the purpose of sustaining 

any proper action . . . for the enforcement of such . . . liability." 

Since 

the repeal of S 4310 did not expressly provide for retroactive 

application, 

Schnall's claims survive under S 109. 

We acknowledge that it could be argued that S 109 does not apply in 

this case, because S 4310 contained, inter alia, a subsection conferring 

jurisdiction on district courts to hear private TISA actions. See 12 

U.S.C. 

S 4310(e). In repealing S 4310, Congress therefore withdrew jurisdiction, 

and the Supreme Court in Bruner v. United States , 343 U.S. 112 (1952), 

held that S 109 does not apply to repeals that simply withdraw the 

jurisdiction of a federal district court without extinguishing any 

liability. 

Id. at 116-17 ("[W]hen a law conferring jurisdiction is repealed without 

any reservation as to pending cases, all cases fall with the law."). We 

believe that Bruner is distinguishable, however, because unlike in 

Bruner, where the withdrawal of jurisdiction from federal district courts 

left the plaintiff with an alternate remedy in the Court of Claims, see 

343 

U.S. at 115, the repeal of S 4310 not only withdrew the jurisdiction of 

federal district courts to hear private TISA enforcement actions, but also 

entirely eliminated the cause of action, thereby releasing banks from 

future claims of private parties to recover actual and statutory damages 

for TISA violations. See De La Rama Steamship Co., Inc. v. United States, 

344 U.S. 386, 390 (1953) (holding that under S 109, pending appeals 

survive "the repeal of statutes which create rights and also prescribe how 
the rights are to be vindicated," and distinguishing "the repeal of 

statutes solely jurisdictional in their scope") (emphasis added). 

 6 
violated either a provision of TISA itself or a regulation 

promulgated pursuant to TISA. We consider first whether 

the Bank's disclosures violated requirements imposed by 

the regulations, and then turn to whether the disclosures 

also violated requirements imposed by TISA itself. 

A. 

1. 

The relevant regulations were promulgated by the Federal 

Reserve Board pursuant to 12 U.S.C. S 4308(a), and are 

found in 12 C.F.R. Part 230, known as Regulation DD. 

Under the regulations, account disclosures and 

advertisements that state a rate of return are required to 

state the account's annual percentage yield. See 12 C.F.R. 

S 230.4(b)(1)(i) ("Account disclosures shall include the 

following, as applicable: . . . The `annual percentage yield' 

and the `interest rate,' using those terms . . . ."); 12 C.F.R. 

S 230.8(b) ("If an advertisement states a rate of return, it 

shall state the rate as an `annual percentage yield' using 

that term."). The regulations define "annual percentage 

yield" as "a percentage rate reflecting the total amount of 

interest paid on an account, based on the interest rate and 

the frequency of compounding for a 365-day period and 

calculated according to the rules in appendix A of this 

part." 12 C.F.R. S 230.2(c). 

Part I.A of appendix A provides that "[f]or accounts 

without a stated maturity date (such as a typical savings or 

transaction account), the calculation shall be based on an 

assumed term of 365 days."3 Because the accounts at issue 

in this case lack a stated maturity date, the advertised APY 

must therefore assume a term of 365 days. 

Part I.B of appendix A specifically defines how the APY 

should be computed for "stepped-rate accounts," which are 

accounts that apply different interest rates during different 

_________________________________________________________________ 

3. For such accounts, Part I.A provides that"the annual percentage yield 

can be calculated by use of the following simple formula: APY = 100 

(Interest/Principal)," where "Interest" is the total dollar amount of 

interest earned on the Principal during the 365 day term. 

 7 
periods of the term: "For accounts with two or more interest 

rates applied in succeeding periods . . . an institution shall 

assume each interest rate is in effect for the length of time 

provided for in the deposit contract." If, for example, a bank 

offers a savings account with a 7% interest rate for the first 

six months and a 3% interest rate thereafter, appendix A 

requires the advertised APY to be the blended rate 

calculated by applying the 7% interest rate for the first six 

months and the 3% interest rate for the remaining six 

months. 

Finally, Part I.C of appendix A specifies how this blendedrate calculation should be performed for a variable rate 

account, which the regulations define as "an account in 

which the interest rate may change after the account is 

opened." 12 C.F.R. S 230.2(v). Part I.C specifically defines 

the method of calculation for accounts such as those at 

issue in this case, where an initial fixed rate applies for a 

given period, followed by a variable rate for the remainder 

of the term: 

 Variable-rate accounts with an introductory premium 

 (or discount) rate must be calculated like a stepped- 

 rate account. Thus, an institution shall assume that: 

 (1) The introductory interest rate is in effect for the 

 length of time provided for in the deposit contract; and 

 (2) the variable interest rate that would have been in 

 effect when the account is opened or advertised (but for 

 the introductory rate) is in effect for the remainder of 

 the year. If the variable rate is tied to an index, the 

 index-based rate in effect at the time of disclosure 

 must be used for the remainder of the year. 

Part I.C illustrates the required method of calculation by 

using the example of an account that pays an introductory 

7% interest rate for the first three months and a variable 

rate thereafter, which at the time of the disclosure is 5%. In 

this example, the advertised APY must be computed by 

applying the 7% interest rate for the first three months and 

by applying the current 5% variable rate for the remaining 

nine months of the term, yielding an APY of 5.65%. Thus, 

in calculating the APY, a bank must assume that the

variable rate that is in effect at the time of the disclosure 

will remain in effect throughout the term, even though this 

 8 
assumption means that the APY that the regulations 

require the bank to advertise will differ from the actual APY 

that the consumer will earn on the account should the 

variable rate change. 

2. 

Applying this method of calculation to the Amboy Money 

Market Account, we agree with Schnall that the Bank's 

advertisements and account disclosures violate the 

regulations, since they fail to state the APY as a single 

composite rate computed on a one-year term, as required 

by appendix A. Instead of calculating the APY by applying 

the introductory 6% APY for the first three months and 

assuming that the variable rate at the time of the disclosure 

would remain in effect throughout the remaining nine 

months of the term, the Bank simply advertised an initial 

6% APY followed by a variable rate set by the 3-month 

Treasury Bill and guaranteed to exceed the combined

average yield of New Jersey's three largest banks. 

The Bank contends that the District Court correctly

concluded that the method of calculating the APY specified 

in appendix A is inapplicable because the variable rate in 

this case is determined not only by the 3-month Treasury 

Bill, but also by the average money market account yields 

of the three largest New Jersey Banks (First Union/NJ, PNC 

Bank/NH, and Summit Bank). We disagree. 

First, appendix A clearly states that with only one

exception, not applicable to this case, the APY that is 

advertised must be calculated according to the specified 

method: "Except as provided in Part I.E. of this appendix, 

the annual percentage yield shall be calculated by the 

formula shown below."4 This statement definitively 

establishes that the specified formula must be applied in 

this case. 

Second, the regulations do not distinguish among 

different types of variable rates for purposes of computing 

the APY that must be advertised. Under Part I.C of the 

_________________________________________________________________ 

4. The exception in Part I.E applies to "time accounts with a stated 

maturity greater than one year that pay interest at least annually." 

 9 
appendix, "Variable rate accounts with an introductory 

premium (or discount) rate must be calculated like a 

stepped-rate account." And the definitions section of the 

regulations provides that "[v]ariable-rate account means an 

account in which the interest rate may change after the 

account is opened." 12 C.F.R. S 230.2(v). Thus, the

regulations treat all variable rates alike, regardless whether 

the rates are a function of one variable, two variables, or 

twenty variables. That the variable rate in this case, rather 

than being solely a function of the 3-month Treasury Bill, 

is a function of both the 3-month Treasury Bill and the 

combined average yield of the three largest New Jersey 

Banks, is immaterial for purposes of the regulations. 

Regardless of what the variable rate depends on, under 

the regulations a bank must determine what the variable 

rate would be at the time of the advertisement, and assume 

that that rate will remain in effect throughout the relevant 

part of the term, for purposes of computing the APY that 

the bank may advertise. Thus, the regulations require 

Amboy to advertise a single blended APY calculated by 

applying the 6% APY for the first three months and by 

applying for the remaining nine months whatever the

current variable rate was at the time of the advertisement. 

This it did not do. 

3. 

The Bank urges us to adopt the District Court's 

reasoning that the guarantee that the APY for the 

remainder of the term would exceed the average APY of the 

Bank's three competitors is pro-consumer, and therefore 

that it should be allowed to advertise that fact. In our view, 

this argument proves too much, since it would apply to any 

variable rate that is determined by reference to an index or 

a competing investment. For example, a variable rate that 

is set to the 3-month Treasury Bill is pro-consumer, since 

it guarantees that consumers will never earn less on their 

savings account than they would on the Treasury Bill. 

Nonetheless, the regulations require that variable rates be 

advertised according to a particular formula, regardless of 

how pro- or anti-consumer the rate is. 

 10 
The District Court also worried that the APY that the 

Bank would be required to advertise under the regulations 

would be misleading because "[i]t would not help the 

consumer know whether this particular snapshot will turn 

out to be accurate for the long run . . . ." We agree that the 

advertised rate required by the regulations may mislead 

consumers, since the advertised APY could differ from the 

actual APY. Consider two banks, one of which offers a fixed 

rate account with a 4% APY and the other of which offers 

a variable rate account that, using the variable rate in effect 

at the time of the advertisement, would have a 4% APY. 

Under the regulations, both banks must advertise the same 

APY of 4%, which risks misleading consumers to believe 

that the two investments are of equal value. This risk is 

mitigated, however, by the requirement that advertisements 

for variable rate accounts "shall state . . . clearly and 

conspicuously . . . that the rate may change after the 

account is opened." 12 C.F.R. S 230.8(c)(1). 

Moreover, even if the regulations required rates to be 

advertised in a misleading manner, unless the defendant 

challenged the regulations' validity, the Court would be 

constrained to apply the regulations that exist. Whether 

these regulations make sense as a matter of policy is 

irrelevant in this case, since the Bank does not challenge 

the regulations' validity on the grounds that the Federal 

Reserve Board exceeded its authority under TISA, acted 

arbitrarily and capriciously in promulgating the regulations, 

or failed to comply with the procedural requirements 

imposed by the Administrative Procedure Act. Absent such 

a challenge, a court may not second-guess the policy 

choices made by an agency in a matter that Congress has 

committed to the agency's discretion. 

4. 

We therefore conclude that the Bank's advertisements 

and account disclosures violated the regulations 

promulgated under TISA by failing to advertise the APY as 

a single composite rate based on a one-year term, 

calculated by applying the 6% introductory rate for the first 

three months and by applying whatever the variable rate 

was at the time of the advertisements for the remaining 

 11 
nine months. We note that this conclusion is supported by 

an amicus letter brief filed at the Court's invitation by the 

Board of Governors of the Federal Reserve System. Signed 

by the Director of the Division of Consumer and 

Community Affairs, the letter concludes that "Amboy did 

not comply with the requirements set forth in Regulation 

DD because . . . the advertisements did not disclose a 

single `composite' APY, based on an assumed term of 365- 

days, and taking into account both the introductory rate 

and post-introductory rate in effect for these accounts at 

the time they were advertised." 

B. 

The Bank argues that even if its advertisements and

account disclosures failed to comply with the regulations, 

the advertisements nonetheless complied with the statutory 

disclosure requirements. Therefore, the Bank submits, 

Schnall's claims were properly dismissed. We disagree. 

Even if the Bank's advertisements complied with the

statutory requirements, the Bank would still be liable for 

violating the regulations, since at the time this lawsuit was 

filed, TISA imposed civil liability on any bank"which fails to 

comply with any . . . regulation prescribed under this 

chapter." 12 U.S.C. S 4310(a). 

At all events, we conclude that the Bank violated the 

statutory disclosure requirements. The Bank argues that its 

advertisements fully complied with the disclosure 

requirements of TISA, which requires that 

 Each advertisement . . . relating to any . . . interest- 

 bearing account . . . which includes any reference .. . 

 to a specific yield . . . shall state the following 

 information, to the extent applicable, in a clear and 

 conspicuous manner: 

 (1) The annual percentage yield. 

 (2) The period during which such annual 

 percentage yield is in effect. 

 (3) All minimum account balance and time 

 requirements which must be met in order to earn the 

 advertised yield . . . . 

 12 
 (4) The minimum amount of the initial deposit 

 which is required to open the account in order to 

 obtain the yield advertised . . . . 

 (5) A statement that regular fees or conditions could 

 reduce the yield . . . . 

 (6) A statement that an interest penalty is required 

 for early withdrawal. 

12 U.S.C. S 4302(a). In the Bank's submission, by 

disclosing in its advertisements that its accounts would 

earn a 6% APY for the first three months, followed by an 

APY based on the 3-month Treasury Bill but guaranteed to 

exceed the average yield of New Jersey's three largest 

banks, the Bank complied with the requirement of 

S 4302(a)(1) that advertisements disclose the"annual 

percentage yield." 

The problem with the Bank's argument, however, is that 

TISA defines "annual percentage yield" as: 

 the total amount of interest that would be received on 

 a $100 deposit, based on the annual rate of simple 

 interest and the frequency of compounding for a 365- 

 day period, expressed as a percentage calculated by a 

 method which shall be prescribed by the Board in 

 regulations. 

12 U.S.C. S 4313(2). This definition of "annual percentage 

yield" applies to the requirements in SS 4302(a)(1) and 

4303(c)(1) that advertisements and account disclosures 

state the annual percentage yield. Because, as explained 

above, the Bank failed to calculate the APY appearing in its 

advertisements and account disclosures according to the 

method prescribed by the regulations, the Bank failed to 

comply with the statutory disclosure requirements imposed 

by SS 4302(a)(1) and 4303(c)(1). 

The District Court focused on the language "to the extent 

applicable" in S 4302(a), and concluded that the required 

method of computing the advertised APY is not applicable 

here, because the variable rate is a function of both the 3- 

month Treasury Bill and the average yield of three other 

banks. The District Court further reasoned that the method 

of calculating the APY specified in the regulations is 

 13 
inapplicable in this case because "blind adherence" to the 

regulation "would not assist [the] consumer in comparing" 

Amboy's account with accounts offered by competitors. 

According to the District Court, applying the formula 

specified in the regulations would thereby frustrate one of 

the stated purposes of TISA, which is to enhance"the 

ability of the consumer to make informed decisions 

regarding deposit accounts." 12 U.S.C. S 4301. 

We disagree with the District Court's interpretation of "to 

the extent applicable" as an invitation to courts to disregard 

the mandate of the regulations if doing so makes sense as 

a matter of policy. In our view, the language "to the extent 

applicable" was included in S 4302(a) because certain 

disclosure requirements enumerated in that provision may 

not apply to a particular account, given the nature of the 

account. For example, S 4302(a)(6) requires advertisements 

to include "[a] statement that an interest penalty is required 

for early withdrawal." This requirement, however, would 

obviously be inapplicable to an account that has no

withdrawal penalty. 

In contrast, the requirement under S 4302(a)(1) that 

advertisements disclose the account's APY is applicable to 

all interest-bearing accounts, including the account at 

issue in this case. As discussed above, the formula in the 

regulations for computing an account's APY is fully

applicable to accounts such as Amboy's, which include an 

introductory fixed interest rate followed by a variable rate 

for the remainder of the term. 

In sum, we hold that by failing to disclose the APY on its 

accounts as a single blended rate based on a 365-day term, 

the Bank's advertisements and account disclosures violated 

both the disclosure requirements found in the regulations, 

see 12 C.F.R. SS 230.2, 230.4, 230.8 & appendix A to part 

230, and the disclosure requirements imposed by the

relevant statutory provisions, see 12 U.S.C.SS 4302, 4303, 

4305 & 4313, which incorporate the regulations by 

reference. Either the violation of the statute or the violation 

of the regulations provides an independent ground for 

liability under S 4310. 

 14 
III. 

The Bank argues that even if its advertisements and

account disclosures violated the requirements imposed by 

TISA and the implementing regulations, the District Court 

properly granted summary judgment on the ground that no 

reasonable jury could find that Schnall was harmed by the 

manner in which the Bank disclosed the APY on its 

accounts. The Bank frames this argument in various terms, 

arguing that Schnall did not rely on the manner in which 

the Bank advertised its APY, that Schnall was not misled by 

the advertisements and disclosures, and that Schnall 

suffered no financial injury as a result of the TISA 

violations. Each characterization relates to the same 

conceptual question whether a TISA plaintiff must show 

that he or she suffered some financial injury that he would 

not have incurred had the defendant complied with TISA. 

Schnall responds that TISA imposes strict liability on 

depository institutions that violate its disclosure

requirements, and that to recover under S 4310, a plaintiff 

need not show that he or she was misled or financially 

harmed by the violation. 

The relevant provision of TISA, 12 U.S.C. S 4310(a), which 

has been repealed since the commencement of this lawsuit, 

see supra note 2, provided that: 

 [A]ny depository institution which fails to comply with 

 any requirement imposed under this chapter or any 

 regulation prescribed under this chapter with respect 

 to any person who is an account holder is liable to 

 such person in an amount equal to the sum of -- 

 (1) any actual damages sustained by such person 

 as a result of the failure; 

 (2)(A) in the case of an individual action, such 

 additional amount as the court may allow, except 

 that the liability under this subparagraph shall not 

 be less than $100 nor greater than $1,000; or 

 (B) in the case of a class action, such amount as 

 the court may allow, except that-- 

 (i) as to each member of the class, no minimum 

 recovery shall be applicable; and 

 15 
 (ii) the total recovery under this subparagraph in 

 any class action . . . arising out of the same failure 

 to comply by the same depository institution shall 

 not be more than the lesser of $500,000 or 1

 percent of the net worth of the depository 

 institution involved; and 

 (3) in the case of any successful action to enforce 

 any liability under paragraph (1) or (2), the costs of 

 the action, together with a reasonable attorney's fee 

 as determined by the court. 

The question before us reduces to whether the language 

imposing liability for any violation "with respect to any 

person who is an account holder" requires account holders 

who bring suit to show that they would not have opened 

their account had the bank's disclosure complied with 

TISA, or that they were otherwise misled or financially 

harmed by the TISA violation. 

In deciding this question, we are writing on a clean slate, 

as this Court has not had occasion to construe S 4310. The 

only court squarely to address the issue was the District 

Court for the Southern District of New York in Hale v. 

Citibank, N.A., 198 F.R.D. 606 (S.D.N.Y. 2001). In an 

opinion by Judge Rakoff, the court in Hale rejected

defendants' claim that reliance is a necessary element of a 

cause of action under S 4310: 

 [N]either the regulation nor TISA itself requires such a 

 showing as a condition of liability, and such exacting 

 notions of reliance, drawn from the common law, are 

 inapplicable, so far as liability is concerned, to a 

 regulatory statute like TISA whose stated purpose is"to 

 require the clear and uniform disclosure of . . . the 

 rates of interest which are payable on deposit accounts 

 by depository institutions." 12 U.S.C. S 4301(b) 

 (emphasis added); see also S. Rep. 102-167, at 80-82 

 (1991). 

Id. at 607.5 We find this reasoning persuasive.6 As the 

_________________________________________________________________ 

5. The court noted that reliance might be relevant, however, for purposes 

of determining actual (in contrast to statutory) damages. Id. 

6. The only other case to discuss the issue is Shelley v. AmSouth Bank, 

 16 
Court in Hale noted, neither the statute nor the regulations 

explicitly require that a plaintiff show reliance or financial 

injury to recover statutory damages under S 4310. 

Moreover, the purpose of TISA is not only to prevent 

consumers from being misled by deceptive advertisements, 

but also to ensure uniformity in how banks advertise rates 

of return. See 12 U.S.C. S 4301 ("The Congress hereby finds 

that economic stability would be enhanced, competition 

between depository institutions would be improved, and the 

ability of the consumer to make informed decisions 

regarding deposit accounts, and to verify accounts, would 

be strengthened if there was uniformity in the disclosure of 

terms and conditions on which interest is paid and fees are 

assessed in connection with such accounts."). This 

consideration also supports the result reached in Hale. 

We read the regulations promulgated under TISA as 

representing a policy judgment by the Federal Reserve 

Board that even if consumers are not misled by 

advertisements that violate the regulations, they benefit 

from the requirement that banks advertise their returns 

according to a standard formula that allows quick and 

accurate comparison of the expected rates of return offered 

by different banks, thus promoting informed consumer 

choice and competition among banks. The harm that TISA 

is intended to prevent, therefore, is not only the financial 

harm that occurs when a consumer is misled by an 

advertisement, but also the information costs and anticompetitive effects created when banks advertise yields in 

non-uniform ways that make it difficult for consumers to 

compare the rates of return offered by competing banks. 

Contrary to the purpose of TISA, interpreting S 4310 to 

require reliance or financial injury would permit banks to 

violate TISA's uniform disclosure requirement as long as 

the advertisements issued by the banks were not 

themselves misleading. Indeed, the advertisements in this 

_________________________________________________________________ 

No. 97-1170-rv-c, 2000 WL 1121778 (S.D. Ala. July 24, 2000), aff 'd, 

247 F.2d 250 (11th Cir. 2001), which briefly stated in dicta that 

"proximate cause and actual damages are not elements of a TISA claim 

for statutory damages." Id. at *14. 

 17 
case, although they prominently feature the "6.00% APY," 

are quite clear that this APY is in effect for only an 

introductory period of three months. It would therefore be 

difficult for a consumer to show that he was misled by the 

advertisement into believing that the 6% APY would be in 

effect for longer than three months. Schnall, as an M.B.A. 

and statistician, see infra note 7, could have easily 

computed from the information in the Amboy advertisement 

the blended APY that the Bank was required to disclose, 

and could have then compared that APY to those offered by 

other banks. One of the purposes of TISA, however, is to 

relieve consumers of this burden, for comparing the yields 

offered by different banks may be difficult for many 

consumers and will take unnecessary time if the yields are 

not advertised uniformly. In order for the regulations in this 

case to have any bite, they must therefore be enforced even 

when advertisements are not necessarily misleading.

To be sure, violations of TISA that do not actually cause 

consumers to be misled could still be prosecuted by the 

Federal Reserve Board. But the structure of S 4310, which 

permitted a plaintiff to recover both actual damages and 

statutory damages, suggests that this provision served the 

dual purpose of both compensating plaintiffs who have 

been misled and deterring banks from advertising in ways 

that Congress and the Federal Reserve Board believe are 

socially harmful. Cf. Williams v. Pub. Fin. Corp., 598 F.2d 

349, 356 (5th Cir. 1979) ("The remedial scheme in the 

[Truth in Lending Act] is designed to deter generally 

illegalities which are only rarely uncovered and punished, 

and not just to compensate borrowers for their actual 

injuries in any particular case."). 

We acknowledge that as a matter of policy, it seems odd 

to permit plaintiffs to sue banks for damages when they 

have personally suffered no financial loss as a result of the 

bank's TISA violation.7 This result, however, is what S 4310, 

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7. A law professor probably could not have imagined a better 

hypothetical than this case, in which the plaintiff, Martin Schnall, has 

an M.B.A. from NYU and masters degrees from Columbia University and 

University of Michigan in biostatistics. Indeed, it is possible that 

Schnall 

never intended to invest his money in a savings account, but saw an 

 18 
as a "private attorney general" statute, contemplated. 

Although TISA authorizes the Federal Reserve Board to 

enforce the Act, see 12 U.S.C. S 4309, the Board has 

limited resources to devote to enforcement, and Congress 

may have deemed it more cost-effective to cede TISA

enforcement to individuals in the private sector who stand 

to profit from efficiently detecting and prosecuting TISA 

violations. 

We also note that S 4310 provided an affirmative defense 

to defendants who unintentionally violate TISA. See 12 

U.S.C. S 4310(c) ("A depository institution may not be held 

liable in any action brought under this section for a 

violation of this chapter if the depository institution 

demonstrates by a preponderance of the evidence that the 

violation was not intentional and resulted from a bona fide 

error, notwithstanding the maintenance of procedures 

reasonably adapted to avoid any such error."). Since a 

plaintiff who suffers actual financial harm as a result of 

being misled by a TISA violation will go uncompensated if 

the violation is inadvertent under S 4310, the primary 

purpose of S 4310 may not have been compensation, but 

rather deterrence. This deterrent purpose is furthered 

under S 4310 by permitting account holders to bring TISA 

actions even if they have not suffered any financial harm as 

a result of the violation. 

Finally, our conclusion is consistent with the 

jurisprudence construing the provision of the Truth in 

Lending Act ("TILA") upon which S 4310 appears to have 

been modeled. The private enforcement provision of TILA 

uses almost the same language as S 4310 in creating a 

private right of action: 

 [A]ny creditor who fails to comply with any requirement 

 imposed under this part . . . with respect to any person 

_________________________________________________________________ 

advertisement that he knew violated TISA, and opened an account 

precisely so that he could then sue the bank under TISA and earn 

statutory damages. Under our construction of S 4310, such a plaintiff 

would nonetheless be entitled to statutory damages, making him better 

off than he would have been had TISA not been violated. 

 19 
 is liable to such person in an amount equal to the sum 

 of -- 

 (1) any actual damage sustained by such person as 

 a result of the failure; 

 (2)(A)(i) in the case of an individual action twice the 

 amount of any finance charge in connection with the 

 transaction . . . ; or 

 (B) in the case of a class action, such amount as 

 the court may allow, except that as to each member 

 of the class no minimum recovery shall be 

 applicable, and the total recovery under this 

 subparagraph in any class action or series of class 

 actions arising out of the same failure to comply by 

 the same creditor shall not be more than the lesser 

 of $500,000 or 1 per centum of the net worth of the 

 creditor . . . . 

15 U.S.C. S 1640(a). A comparison of the language and 

structure of this provision with the language and structure 

of S 4310, quoted supra at 15-16, leaves little doubt that 

Congress, in enacting S 4310 in 1991, consciously borrowed 

the language of TILA. 

This Court has squarely held that reliance is not an 

element of a cause of action under TILA. See Manning v. 

Princeton Consumer Disc. Co., 533 F.2d 102, 106 (3d Cir. 

1976) ("Although it is extremely unlikely that the purchaser 

was not aware of the undisclosed terms, i.e., selling price, 

down payment and balance, we cannot say that the district 

court erred in imposing the penalty and attorneys' fees 

under the circumstances here."); see also Dzadovsky v. 

Lyons Ford Sales, Inc., 593 F.2d 538, 539 (3d Cir. 1979) 

(per curiam) (rejecting "the requirement of financial loss 

before a borrower may bring an action" under TILA).

Indeed, as noted in the margin, those Courts of Appeals 

that have considered the issue are nearly unanimous that 

to recover statutory damages under TILA, plaintiffs need 

not show that they would not have agreed to the 

transaction had the lender's disclosure complied with TILA 

 20 
or that they were otherwise misled or suffered financial 

injury as a result of the TILA violation.8 

Given the similar purposes of TISA and TILA and the

_________________________________________________________________ 

8. See, e.g., Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 66 

(4th Cir. 1983) ("The district court held that these violations were only 

technical and because [plaintiff] sustained no actual injury as a result 

of 

them, no liability on the part of the creditors arose. We disagree and 

reverse the judgment of the lower court."); Brown v. Marquette Sav. & 

Loan Ass'n, 686 F.2d 608, 614 (7th Cir. 1982) ("As an initial matter we 

note that the violation before us is a purely technical one, and that the 

plaintiffs do not claim that they were misled or suffered any actual 

damages as a result of the statutory violation. It is well settled, 

however, 

that a borrower need not have been so deceived to recover the statutory 

penalty."); Dryden v. Lou Budke's Arrow Fin. Co., 630 F.2d 641, 647 (8th 

Cir. 1980) ("TILA plaintiffs, otherwise entitled to recover, need not show 

that they sustained actual damages stemming from the TILA violations 

proved before they may recover the statutory damages the Act also 

provides for."); Smith v. Chapman, 614 F.2d 968, 971 (5th Cir. 1980) ("It 

is not necessary that the plaintiff-consumer actually have been deceived 

in order for there to be a [TILA] violation."); Hinkle v. Rock Springs 

Nat'l 

Bank, 538 F.2d 295, 297 (10th Cir. 1976) ("It is apparent that no 

showing of actual damages is required and instead the recovery is fixed 

by statute."). 

The only case to depart from strict liability under TILA is Streit v. 

Fireside Chrysler-Plymouth, Inc., 697 F.2d 193 (7th Cir. 1983), in which 

the defendant, a car dealer, allegedly violated TILA by neglecting to 

provide the plaintiff with a duplicate of the retail installment contract. 

Id. 

at 194. After paying a portion of the down payment, the plaintiff 

returned the car claiming that it was defective and refused to pay any 

installments. Id. at 194-95. The court rejected the plaintiff's TILA 

claim: 

 [I]t is not good policy and is not required by a reasonable 

 construction of the Act to hold a creditor liable for a technical 

 violation of the sort here involved: where the consumer was not 

 misled nor financially harmed and where the consumer unilaterally 

 breached the contract almost immediately after it was entered. The 

 purposes of the Act and the respect the Act is due are not served 

by 

 a rigid application that results in an unjustified windfall to the 

 consumer. 

Id. at 197. The holding in Streit therefore appears confined to the 

specific 
facts of that case -- namely the hyper-technical nature of the violation 

(failure to provide a duplicate of the finance agreement) and the 

plaintiff's own actionable conduct (breach of contract). 

 21 
fairly substantial body of TILA caselaw that existed at the 

time Congress enacted TISA in 1991, we presume that

Congress was aware of the judicial interpretation of TILA 

and that in borrowing language from TILA, Congress 

intended that language to have the same meaning that 

courts had given TILA.9 Cf. Northcross v. Bd. of Educ., 412 

U.S. 427, 428 (1973) (per curiam) (noting that "similarity of 

language . . . is, of course, a strong indication that . . . two 

statutes should be interpreted pari passu," particularly 

where "the two provisions share a common raison d'etre" 

(internal quotations omitted)). Since the TILA jurisprudence 

overwhelmingly rejects any reliance requirement, it seems 

likely that Congress did not intend to impose any such 

requirement under the similarly-worded provision of TISA. 

For the foregoing reasons, we hold that to recover 

statutory damages under S 4310, a plaintiff need not show 

that he relied on the advertised APY, that he would not 

have opened the account had the advertisement complied 

with TISA, or that he was otherwise misled or financially 

harmed by the failure to comply with TISA's disclosure 

requirements.10 

IV. 

Because we hold that the Bank's advertisements and 

account disclosures violated TISA and the implementing 

regulations, and because we hold that to recover statutory 

_________________________________________________________________ 

9. The stated purpose of TISA is "to require the clear and uniform 

disclosure of . . . the rates of interest which are payable on deposit 

accounts by depository institutions . . . and the fees that are assessable 

against deposit accounts so that consumers can make a meaningful 

comparison between the competing claims of depository institutions with 

regard to deposit accounts." 12 U.S.C. S 4301(b). Similarly, the stated 

purpose of TILA is "to assure a meaningful disclosure of credit terms so 

that the consumer will be able to compare more readily the various 

credit terms available to him and avoid the uninformed use of credit, and 

to protect the consumer against inaccurate and unfair credit billing and 

credit card practices." 15 U.S.C. S 1601(a). 

10. To recover actual damages, however, a plaintiff must obviously show 

that he suffered some financial harm that he would not have suffered 

had the advertisements and disclosures in question complied with TISA. 

 22 
damages an account holder need not show that he was

misled or financially harmed by the defendant's failure to 

comply with TISA, we hold that Schnall is entitled to partial 

summary judgment on the question of liability. See Fed. R. 

Civ. P. 56(c) ("A summary judgment, interlocutory in 

character, may be rendered on the issue of liability alone 

although there is a genuine issue as to the amount of 

damages."). 

Accordingly, the order of the District Court granting the 

Bank's motion for summary judgment and denying 

Schnall's cross-motion for partial summary judgment will 

be reversed, and this case will be remanded for further 

proceedings to determine the amount of damages to be 

awarded. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 23