Opinion ID: 1284689
Heading Depth: 1
Heading Rank: 2

Heading: Open-end versus Closed-end Credit

Text: Consumer credit is divided into two categories, open-end credit and closed-end credit. Open-end credit involves a credit sale or loan, generally without a fixed term, under an arrangement which allows the consumer to borrow additional amounts as desired up to an established credit limit such as under a credit card or revolving loan. Repayment is normally made based on the current account balance. Anthony Rollo, A Primer on Consumer Credit Insurance, 54 Consumer Fin. L.Q. Rep. 52, 52 (2000). On the other hand, [c]losed-end credit involves a credit or loan of a specific term where the borrower typically agrees to repay the debt in equal monthly payments over a set term, either in a cash and credit transaction where the debtor receives cash from a lender to buy consumer products by entering into the credit obligation (a loan), or in a retail installment sale transaction where the consumer receives a product by entering into the credit obligation directly with the seller (a credit sale). Id. An analysis of W. Va.Code § 46A-5-101(1) (1996) (Repl.Vol.1999) shows that it, too, contains the dichotomy between open-end and closed-end credit. W.Va.Code § 46A-5-101(1) provides, in pertinent part: With respect to violations arising from consumer credit sales or consumer loans made pursuant to revolving charge accounts or revolving loan accounts, or from sales as defined in article six of this chapter, no action pursuant to this subsection may be brought more than four years after the violations occurred. With respect to violations arising from other consumer credit sales or consumer loans, no action pursuant to this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement. W. Va.Code § 46A-5-101(1) thus recognizes two kinds of credit transactions: (1) those involving revolving charge accounts, revolving loan accounts or from sales as defined in article six of the WVCCPA and (2) all other consumer credit sales or consumer loans. While W. Va.Code § 46A-5-101(1) does not use the specific term open-end credit, open-end credit is understood to be synonymous with revolving credit. E.g., H.R. Rep. 90-1040 (1967), reprinted in 1968 U.S.C.C.A.N. 1962, 1971 (recognizing that open-end credit plans are more commonly known as revolving charge accounts). [1] Moreover, while the majority asserts that W. Va.Code § 46A-5-101(1) does not specifically address the concept of closed-ended contracts; [and that] the Appellees only assume that the legislature's use of the term `other contracts' embraced open-ended contracts[,] Maj. Op. at 582 S.E.2d at 844, it does not explain what other consumer credit sales or consumer loans could mean besides closed-ended contracts. This common sense recognition that if the credit is not open-end, it must be closed-end, has antecedents in both state and federal consumer law. For example, the official Kansas comment accompanying its adoption of the UCCC's limitation provision [2] explains that the one-year limitation for other consumer transactions not covered by the two-year limitation for open end credit applies to closed-end credit. Kan. Stat. Ann. § 16a-5-201(1) (1995), at Kansas comment 2000 ([S]ubsection (1) also provides for a relatively short statute of limitations: one year after the last installment is due under a closed end contract and two years after the violation occurs under open end credit.). Likewise, the federal regulations implementing Title I of the Federal Consumer Credit Protection Act explains that  [c]losed-end credit means consumer credit other than open-end credit as defined in this section. 12 C.F.R. § 226.2(10) (2003). Consequently, W. Va.Code § 46A-5-101(1) makes provision for two different types of transactionsopen-end and closed-end. With this understanding, I now turn to an examination of whether W. Va.Code § 46A-5-101(1) is ambiguous.