Court Opinion

ID: 9635714
Source: CourtListenerOpinion
Date Created: 2023-08-22 14:01:21.316777+00
Date Added: 2024-06-11T18:09:33.555684
License: Public Domain

GRABER, Circuit Judge,
concurring in part and dissenting in part:
I concur in the opinion, with the exception of Parts III.A and III.B.2.a. To those portions of the opinion, I respectfully must dissent. Display (e.g., size and font of the print) and placement are not the only defects in the Chase Agreement. Rather, in the procedural posture of this case, I would conclude that the disclosures are not only unclear and inconspicuous, but also substantively insufficient under Regulation Z. 12 C.F.R. §§ 226.6(a), 226.5(a)(1), 226.5(c).
As the majority correctly observes, the Truth in Lending Act (“TILA”) is designed “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit *893terms available to him and avoid the uninformed use of credit.” 15 U.S.C. § 1601(a). But the majority’s interpretation of Regulation Z’s requirements allows Chase to circumvent that goal. The majority opinion concludes that Chase’s reservation of the right to change the terms of the Agreement, standing alone, constitutes adequate disclosure of every possible Annual Percentage Rate (“APR”) it may use, because it discloses that Chase has a right to change the terms of the Agreement at any time, without limitation. Maj. op. at 890-91. In other words, Chase can raise the Barrers’ APR for any reason, however bizarre or unexpected, without informing them that it intends to do so. For example, under the majority’s opinion, Chase has adequately disclosed that it had a preexisting plan to raise the Barrers’ APR to 50% if they dye their hair red. The majority opinion would allow that result simply because Chase included in the Agreement an unrestricted change-in-terms provision.
Chase has little or no incentive to limit its own ability to change a customer’s APR or to inform its customers of its plans. By failing to read Regulation Z in a manner that requires credit card companies to give meaningful information to customers, the majority effectively has let the fox guard the henhouse and has disregarded the purpose of TILA.
I would hold instead, at the pleading stage, that Chase’s disclosures were not necessarily substantively adequate as a matter of law. As the opinion notes, we must take as true the allegations of the complaint, because the case comes to us on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Maj. op. at 889 n. 7. Therefore, it is a given for purposes of our decision that Chase maintained a pre-existing program, at the time the Barrers entered into the Agreement, under which Chase planned to raise the Barrers’ APR if certain specific risk factors appeared in their credit history: an unfavorable eredit-to-debt ratio, a large number of lines of credit, or other adverse information. Those facts, which we must deem true, required Chase to disclose — truthfully and conspicuously — that it maintained a pre-existing program under which it would raise the Barrers’ APR if Chase learned of certain specific risk factors, including negative credit events that occurred before the extension of credit.1 It did not do so.
Although the majority rests its conclusion about the substantive adequacy of the disclosure solely on the change-in-terms provision, maj. op. at 890-91, I am uncertain that even a combination of the change-in-terms provision and the credit history monitoring term would suffice to meet Regulation Z’s standards. Even if those two terms had appeared together, in large bold print, it is not clear to me that the combination would have informed the Barrers adequately that Chase could change their APR on the basis of particular types of adverse information in their credit history reports. That is, assuming that the Barrers read and understood each provision correctly, I doubt that they could be expected to put both terms together to reach the understanding that Chase and the majority deem obvious: that Chase could raise their APR based on information it receives from routine credit moni*894toring.2
In addition to ensuring fairness and allowing for comparison shopping, one reason to require disclosure is to permit consumers to conform their behavior to the information — for example, to refrain from dyeing their hair red or from opening additional credit card accounts, so as to avoid an increase in their APR. In my view, the content of the Chase Agreement is too vague and general to allow a reasonable, average consumer to understand the terms and adjust his or her behavior accordingly. Cf. Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1119 (9th Cir.2009) (holding that an explanation was adequate when it disclosed specifically that the APR may change “if any minimum payment on any loan or account” is not made by the payment due date). Chase’s broad reservation of rights, without more, cannot fulfill that purpose.
Of course, the evidence may demonstrate that there was no pre-existing program as alleged, in which case there was nothing to disclose. But we cannot make that assumption because we must deem the Barrers’ allegations to be true. If there were such a program as alleged, its content would have to be disclosed both truthfully and conspicuously. I therefore dissent from Parts III.A and III.B.2.a.

. The allegation that "Chase ... uses [information from consumer credit reports] to deem customers in default, based on credit events that existed prior to the extension of credit,” Complaint at ¶ 24, is particularly troubling because it suggests that Chase knew of negative credit events that would result in its raising the Barrers' APR, even before it extended credit to them at a lower rate.

. The requirement that I am suggesting would not be onerous. Here is one illustration: "Chase may raise your interest rate if it learns, from reviewing consumer credit reports about you, that you have opened a large number of credit accounts, that you are carrying a large amount of debt, or that your credit history is less than fully satisfactory in any other way, even if the credit reports concern events that happened before you signed this Agreement.”