__NOTOC__ Chase Bank USA, N.A. v. McCoy, , was a United States Supreme Court case in which the court held that, before August 2009, Regulation Z did not require banks to provide credit-card holders with a change-in-terms notice before raising their interest rate after a delinquency or default..
Background
Regulation Z—promulgated by the Federal Reserve Board (Board) pursuant to its authority under the Truth in Lending Act—requires credit-card issuers to disclose certain information to cardholders. The version of the regulation in effect at the time this dispute arose obliged issuers to provide to cardholders an "[i]nitial disclosure statement," specifying "each periodic rate that may be used to compute the finance charge". It also imposed "[s]ubsequent disclosure requirements," including notice to cardholders "[w]henever any term required to be disclosed under §226.6 [was] changed". When "a periodic rate or other finance charge [was] increased because of the consumer's delinquency or default," notice needed to be given "before the effective date of the change."
At the time McCoy filed suit, he was the holder of a credit card issued by Chase Bank. The cardholder agreement provided that McCoy was eligible for "preferred rates" as long as he met certain conditions. If any of those conditions were not met, Chase reserved the right to raise the rate, up to a pre-set maximum, and to apply the change to both existing and new balances. McCoy alleged that Chase increased his interest rate due to his delinquency or default and applied that increase retroactively, and that this action violated Regulation Z because Chase did not notify him of the increase until after it had taken effect. The federal District Court dismissed his complaint, holding that because the increase did not constitute a "change in terms", Chase was not required to notify him of the increase before implementing it. The Ninth Circuit Court of Appeals reversed that portion of the decision, holding that Regulation Z required issuers to provide notice of an interest-rate increase prior to its effective date.
Opinion of the court
The Supreme Court issued an opinion on January 24, 2011.
Later developments
References
External links