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Barrer v. Chase Bank USA

566 F.3d 883 (2009)

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Barrer v. Chase Bank USA

United States Court of Appeals for the Ninth Circuit

566 F.3d 883 (2009)

Facts

Walter and Cheryl Barrer (plaintiffs) held a credit card with Chase Bank USA (defendant). In 2004, the Barrers signed the Cardmember Agreement (the agreement) that set forth the terms of their relationship with Chase. The Barrers had a preferred annual percentage rate (APR) of 8.99 percent under the agreement. In a section entitled “Finance Charges,” the agreement provided a mathematical formula for calculating preferred and nonpreferred APRs. The agreement included that Chase might increase the APR on the account balance in the event of default. The agreement specified events that constituted default, such as failure to pay a minimum payment on time. A different section of the agreement, buried in fine print 10 pages into the agreement and entitled “Changes to the Agreement,” provided that Chase was able to change the agreement at any time and could modify any provision, including APRs and fees. The agreement also included that Chase could periodically review the other party’s credit history by obtaining information from credit bureaus and others. In 2005, Chase mailed a Change in Terms Notice (the notice) to the Barrers. The notice purported to amend the terms of the agreement and increased their APR from 8.99 percent to 24.24 percent nonpreferred or default rate. The Barrers contacted Chase to find out why their APR had changed. Chase informed the Barrers that their APR was raised because their outstanding credit loans on revolving accounts were too high and they had too many recently opened installment or revolving accounts. The Barrers filed a class-action lawsuit in district court on their behalf and behalf of all Chase credit-card customers similarly situated and harmed. The Barrers alleged that Chase violated the Truth in Lending Act (TILA) and TILA’s Regulation Z because Chase did not fully disclose that they may raise a preferred APR to a nonpreferred APR based upon information in a customer’s credit report. Chase filed a motion to dismiss for failure to state a claim. The district court granted Chase’s motion and dismissed the case. The Barrers appealed.

Rule of Law

Issue

Holding and Reasoning (O’Scannlain, J.)

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