In Krieger v. Bank of America, N.A., 2018 WL 2224393, at *5-8 (3d Cir. May 16, 2018), the Court of Appeals for the Third Circuit overturned a District Court order dismissing the plaintiff’s Fair Credit Billing Act (FCBA) claim. On July 29, 2015, the plaintiff called the bank to dispute an allegedly fraudulent $657 charge which was first reflected on his July 2015 Bank of America credit card statement. Bank of America initially credited the plaintiff’s account–which was noted on the August 2015 statement–only to later reinstate the charge on the plaintiff’s September 2015 account statement. In dismissing the plaintiff’s FCBA claim, the District Court ruled that the plaintiff’s 60-day window to submit written notice of a disputed charge must be calculated from the “first periodic statement that reflects the alleged billing error” as set forth in 12 C.F.R. § 1026.13(b)–which the District Court concluded was the July 2015 account statement. The Third Circuit rejected this interpretation, holding that “where a creditor removes a charge from a consumer’s statement only later to reinstate it, the consumer has 60 days after receiving the first statement on which the reinstated charge appears to provide written notice of the billing error.” Id. at *6. According to the Court of Appeals, that was the September 2015 statement. The Circuit Court reasoned:
To hold otherwise would saddle the consumer with an ongoing duty to file a written dispute concerning a seemingly “resolved” dispute or risk forfeiting all rights under the FCBA, and, at the same time, would offer creditors a path to avoid their FCBA obligations altogether by automatically removing a charge in response to a concerned consumer’s call—surely a common first response when a curious charge appears on a credit card bill—and then waiting for 60 days to pass before reinstating it.
The Third Circuit also held that the plaintiff had properly stated an actionable “Unauthorized Use” claim under the Truth in Lending Act (TILA) for the bank’s alleged violation of 15 U.S.C. § 1643.
We conclude that a cardholder incurs “liability” for an allegedly unauthorized charge when an issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge. When an issuer does so, it must comply with the requirements of § 1643, and when a cardholder alleges those requirements were violated, those allegations may state a claim under § 1640.
The Court of Appeals further noted that the plaintiff’s choice to pay the $657 disputed charge first and then sue did not deprive him of his right to seek damages under Section 1643. The Third Circuit reasoned that the purpose of Section 1643–i.e., consumer protection–would “not [be] served by forcing every cardholder billed for an unauthorized charge to pick between twin evils: (1) refusing to pay, and risking late fees, interest, and rate increases, see 15 U.S.C. § 1637(b)(11)(B)(ii), (b)(12); or (2) paying, and forfeiting his right to limited liability altogether.”