Credit Card Holder has Remedies under the TILA and FCBA against Issuer due to unauthorized use of Credit Card according to Third Circuit

In Krieger v. Bank of America, the plaintiff unknowingly gave a scammer access to his personal computer, which was used to make a $657 Western Union charge on his Bank of America (BOA) credit card. Upon realizing the scam, the plaintiff immediately contacted BOA and was told that nothing could be done until he received his monthly billing statement. On receipt of the statement one month later, the plaintiff again contacted BOA, which credited his account while it investigated. In a confirmatory letter, BOA stated that, although Western Union could provide additional facts, BOA considered the dispute resolved. Although the plaintiff's next statement showed the credit, BOA followed up with a subsequent letter, which stated that, based upon additional information from Western Union, BOA believed the charge was in fact valid and would reinstate it to the plaintiff's account. The plaintiff then sent a letter detailing the events, declaring the charge invalid, and requested it be removed. BOA denied his request. The plaintiff paid the charge and filed suit.

The plaintiff alleged violations of the Fair Credit Billing Act (FCBA), 15 U.S.C. § 1601-1667f and the Truth in Lending Act's (TILA) unauthorized use provision, 15 U.S.C. § 1643. Within 60 days receipt of a written notice of error, the FCBA requires a creditor to: 1) acknowledge receipt of the dispute in writing within 30 days; and 2) within two billing cycles, or no later than 90 days, either correct the account or conduct an investigation and provide a written explanation as to why the statement is correct. Here, the plaintiff alleged that BOA failed to credit his account or conduct a reasonable investigation.

The unauthorized use provision of the TILA places fraud risk on a credit card issuer rather than the cardholder. Here, as long as certain conditions are met, a cardholder's liability is limited to $50, and the plaintiff sought actual damages, costs, and attorney's fees, available under the TILA.

The district court dismissed the plaintiff's complaint, finding that the plaintiff's written dispute was untimely because the FCBA's 60-day period to provide written notice of an error began when the $657 charge first appeared on the billing statement, even though it was subsequently credited and re-applied. The court also found that the TILA does not create a private cause of action, but in fact only limits the card issuer's potential recovery for fraudulent purchases.

The Third Circuit reversed. As to the FCBA, the Third Circuit found that the 60-day window to dispute a charge began when the charge was reinstated following BOA receiving "additional information" from Western Union. After BOA had first credited the charge, the plaintiff had no claim. Only after it was re-applied did a claim arise. The Third Circuit noted this interpretation was consistent with the FCBA's legislative purposes and the Consumer Financial Protection Bureau's guidance. A reasonable consumer would not have believed a billing error still existed after the charge had been credited. Otherwise, a cardholder would be required to challenge a resolved dispute.

Regarding the TILA, the Third Circuit held that a private cause of action is available under the unauthorized use provision against a card issuer. The Third Circuit also found that the district court misconstrued the significant distinction between reimbursements and actual damages. Even though the TILA does not allow consumers to bring actions to obtain reimbursements for unauthorized charges, the plaintiff could bring suit because he had tied his claim to the $50 limitation on liability and suffered actual damages once he was again charged $657.

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