SW Legal studies in Business

Fee for Going Over Credit Card Limit Is Finance Charge under TILA
Description Appeals court held that although Regulation Z did not specify that a monthly fee charged on a credit account for exceeding the credit limit was a finance charge, the intent of TILA on this issue is clear that such a charge is a finance charge subject to disclosure.
Topic Consumer Protection
Key Words Truth in Lending; Disclosure; Finance Charges; Regulation Z; Credit Cards
C A S E   S U M M A R Y
Facts Pfennig brought a class action suit against Household Credit Services for violations of the Truth in Lending Act. She contended that she was extended credit but was then charged a fee of $29 a month when she went over the $2,000 limit on her credit card. The fee was omitted from the finance charges disclosed on her monthly statements, but was listed as a new purchase on which additional finance charges were calculated. The district court dismissed her suit. She appealed.

Reversed. Regulation Z of the Federal Reserve Board does not include this specific kind of charge in its definition of "finance charge." Since the matter is not settled, the court must look to the intent of Congress in the Act. "The fee imposed in this case falls squarely within the statutory definition of a finance charge." However, the credit card companies are immune from liability for violating the Act for failing to disclose this fee as a finance charge because they have a good faith defense of complying with the existing regulations.

Citation Pfennig v. Household Credit Services, Inc., 295 F.3d 522 (6th Cir., 2002)

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