Opinion ID: 807798
Heading Depth: 4
Heading Rank: 1

Heading: “Unlawful” Business Practices Claim Against

Text: HSBC To be “unlawful” under the UCL, the advertisements must violate another “borrowed” law. Cel-Tech, 973 P.2d at 539-40 (“[S]ection 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.”) (internal quotation marks omitted). “[V]irtually any state, federal or local law can serve as the predicate for an action under section 17200.” People ex rel. Bill Lockyer v. Fremont Life Ins. Co., 128 Cal. Rptr. 2d 463, 469 (Ct. App. 2002) (internal citation and quotation marks omitted). In this case, Davis alleges that the advertisements violated OCC regulation 12 C.F.R. § 7.4008(c), which states that “[a] national bank shall not engage in unfair or deceptive practices within the meaning of section 5 of the Federal Trade Commission Act, 15 U.S.C. [§ ] 45(a)(1), and regulations promulgated thereunder in connection with loans made under this § 7.4008.” Defendants admit that the RZMC credit card loan was made pursuant to 12 C.F.R. § 7.4008, so the question is whether their conduct was unfair or deceptive.5 [18] A practice is deceptive under section 5 “(1) if it is likely to mislead consumers acting reasonably under the circumstances (2) in a way that is material.” F.T.C. v. Cyberspace.com LLC, 453 F.3d 1196, 1199 (9th Cir. 2006). For the 5 Davis also argues that the disclosure of the annual fee in the online application was “unfair and deceptive” in violation of the OCC regulation and was therefore “unlawful” under the UCL. However, because the safe harbor protects the application, this basis for the UCL claim must fail. While we are sensitive that there may be some facial tension between the TILA safe harbor and the OCC regulation in this situation, we need not address it here because (1) the California Supreme Court has not indicated that such a tension thwarts the safe harbor, and (2) in any event, the parties have not raised this issue. 10390 DAVIS v. HSBC BANK NEVADA same reasons discussed above with respect to the FAL claim, we reject the argument that the advertisements were deceptive under section 5. No reasonable consumer would have been deceived by these advertisements into thinking that no annual fee would be imposed. Nor were the advertisements unfair. A practice is “unfair” under section 5 only if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” 15 U.S.C. § 45(n). “In determining whether consumers’ injuries were reasonably avoidable, courts look to whether the consumers had a free and informed choice.” F.T.C. v. Neovi, Inc., 604 F.3d 1150, 1158 (9th Cir. 2010). An injury is reasonably avoidable if consumers “have reason to anticipate the impending harm and the means to avoid it,” or if consumers are aware of, and are reasonably capable of pursuing, potential avenues toward mitigating the injury after the fact. Orkin Exterminating Co., Inc. v. F.T.C., 849 F.2d 1354, 1365-66 (11th Cir. 1988) (cited approvingly in Neovi, 604 F.3d at 1158). Davis’s alleged injury was certainly avoidable before he completed the application for the RZMC. The advertisement contained the disclaimer, “other restrictions may apply,” which would have motivated a reasonable consumer to consult the terms and conditions. If that were not enough, the online application used boldface and oversized font to alert Davis to the Important Terms & Disclosure Statement, instructing him to “read the notice below carefully.” The disclaimer and the terms and conditions were enough to give a reasonable consumer “reason to anticipate” the possibility of fees. Additionally, the fact that Davis was required to check the box indicating his assent before completing the application meant that he could have aborted his application upon reading the terms and conditions. This provided “the means to avoid” the alleged harm. DAVIS v. HSBC BANK NEVADA 10391 [19] The annual fee was also avoidable after the account was opened. Pursuant to the Cardmember Agreement, which Davis admits he received after completing the application, the annual fee was completely refundable if Davis closed his account within 90 days without using the card. Davis refused to do so, citing the negative impact it would have on his credit score. The question, however, is not whether subsequent mitigation was convenient or costless, but whether it was “reasonably possible.” Orkin, 849 F.2d at 1365. Under these circumstances, we conclude that Davis reasonably could have avoided the annual fee, and therefore that the advertisements were not unfair under section 5. Accordingly, the advertisements were not “unlawful” under the UCL.