Opinion ID: 409079
Heading Depth: 2
Heading Rank: 1

Heading: Coverage of the Regulation: Contractual Liability on an Open End Account

Text: 13 By its terms, § 202.7(c) reaches only terminations of existing open end accounts on which the creditholder is contractually liable. Open End Credit is defined in 12 C.F.R. § 202.2(w) as credit extended pursuant to a plan under which a creditor may permit an applicant to make purchases or obtain loan(s) from time to time.... Contractually liable means expressly obligated to repay all debts arising on an account by reason of an agreement to that effect. 12 C.F.R. § 202.2(i). Amex has argued that the reference to persons contractually liable was meant to exclude spouses who are only users of accounts. The Federal Reserve Board's comments, made when the contractually liable phrase was added in 1975, indicate that the phrase was designed to exclude a user who might be liable for a specific debt charged to a spouse's account, but (who) is not liable on the contract creating the account. 40 Fed.Reg. 49,298 (1975) (emphasis added). 14 Mrs. Miller was not, however, merely a user of her husband's basic account. She was personally liable under the contract creating her supplementary account for all debts charged on her card by any person. For example, Mrs. Miller would have been personally liable for even charges made on her supplementary card by her husband, the basic cardholder. 15 We are unconvinced by Amex's argument that the supplementary account was created by the agreement establishing Mr. Miller's basic card account. Mrs. Miller's supplementary card was issued after the basic card account had been set up, and pursuant to a separate application which had to be signed by Mrs. Miller as well as by her husband. If the basic card account had already created the supplementary account, such prerequisites to a supplementary card, especially Mrs. Miller's agreement to be liable, would be unnecessary. 16 Amex's cardholder agreement provides that by either signing, using or accepting the Card, you will be agreeing with us to everything written here and that (i)f you are a Supplementary Cardmember, you are liable to us for all Charges made in connection with the Card issued to you.... This language made Mrs. Miller contractually liable for all debts on her supplementary account. 2 17 Other differences between Mrs. Miller's card and her husband's also persuade us that her supplementary account was in substance a separate account from her husband's basic one. Her card was issued in her own name, carried an additional issuance fee, and had a different account number and expiration date from Mr. Miller's card. 18