The Ninth Circuit Court of Appeals reversed, holding that Regulation Z required notice of an interest rate increase prior to its effective date.
District Court for the Central District of California, which dismissed the case, holding that the increase did not constitute a “change in terms” as contemplated by §226.9(c) of Regulation Z. McCoy brought suit in the Superior Court of Orange County, California, on behalf of himself and others similarly situated, alleging that Chase had applied the interest increase retroactively in violation of Regulation Z. Upon failure to satisfy the conditions, Chase reserved the right to change McCoy’s interest rate up to a maximum non-preferred rate described in a pricing schedule. The cardholder agreement provided that McCoy was eligible for preferred interest rates, subject to his satisfaction of certain conditions, including making payments when due. James McCoy was the holder of a credit card issued by Chase Bank. However, James McCoy’s case arose prior to these legal changes. As revised, TILA and Regulation Z require 45 days advance notice for most increases in annual percentage rates. In 2009, however, the Board promulgated a revised final rule consistent with Congress’ amendments to TILA in the Credit Card Accountability, Responsibility and Disclosure Act of 2009. Among other things, this notice expressed the Board’s interpretation that Regulation Z didn’t require advance notice where interest rate increases were triggered on the basis of events specified in the credit agreement. In 2004, the Board issued an advance notice of its intent to consider revisions. Pursuant to its authority under TILA, the Federal Reserve Board (the “Board”) promulgated Regulation Z, which requires credit card issuers to disclose certain information to cardholders. The Truth in Lending Act (“TILA”) was enacted by Congress to promote the informed use of consumer credit.
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