Sunday, April 16, 2023

FYI: 3rd Cir Holds TILA Does Not Require Breakdown of Annual Credit Card Fee

The U.S. Court of Appeals for the Third Circuit recently affirmed the dismissal of a consumer's claims under the federal Truth in Lending Act (TILA), 15 U.S.C. 1601, and its implementing regulation, Regulation Z (12 C.F.R. § 1026).


In so ruling, the Third Circuit held that TILA does not require disclosure of each individual component of the total annual fee in a renewal notice for a credit card.


A copy of the opinion is available at:  Link to Opinion


A consumer's credit card member agreement entered into with a bank disclosed an "Annual Membership Fee" to be added to his billing statement and that the consumer may request an additional card for an authorized user. A "Rates and Fees Table" disclosed the annual membership fee as $450 plus $75 for each additional card. The consumer included one additional user.


The consumer alleged that his December 2019 billing statement included a renewal notice, stating that the consumer's annual $525 membership fee would be billed on 02/01/2020, how the fee would be charged, and how the consumer could avoid it. 


However, the notice purportedly did not specify the breakdown: $450 for the primary cardholder and $75 for the additional user. The fees appeared as separate items on the consumer's February 2020 billing statement: a $450 charge and another for $75. The consumer paid $525 but claimed that had he been aware he could retain his credit card for $450, he would have paid only that amount.


The consumer filed a putative class action, alleging that the bank's failure to itemize each component of the renewal fee in the December 2019 renewal notice violated TILA and Regulation Z. The trial court granted the bank's motion to dismiss, and the consumer timely appealed.


The Third Circuit held that the consumer had standing, but also determined that he failed to allege that the bank's renewal notice violated TILA or Regulation Z.


Under TILA and Regulation Z, a renewal notice must contain "clear and conspicuous disclosure[s]" of the following: (1) "the date by which, the month by which, or the billing period at the close of which, the account will expire if not renewed"; (2) "[a]ny annual fee, other periodic fee, or membership fee imposed for the issuance or availability of a credit card, including any account maintenance fee or other charge imposed based on activity or inactivity for the account during the billing cycle"; and (3) "the method by which the consumer may terminate continued credit availability under the account." 15 U.S.C. §1637(d)(1). Regulation Z further provides that a renewal notice must "reflect the terms actually in effect at the time of renewal." 12 C.F.R. § 1026, Supp. I, Part 1, cmt. 9(e), ¶ 3.


The Third Circuit found that there was no dispute that the bank's notice provided the date on which the account would close if not renewed and the method for canceling the consumer's account. Moreover, the notice disclosed the terms actually in effect at the time of renewal because, as stated in the consumer's cardholder agreement, the consumer was required to pay an annual fee of $525 for the primary card and the additional card for an authorized user. The Court therefore concluded that the notice clearly and conspicuously disclosed the "annual fee . . . imposed for the issuance or availability of a credit card." 15 U.S.C. § 1637(c)(1)(A)(ii)(I); 12 C.F.R. § 1026.60(b)(2)(i).


Additionally, the Third Circuit determined that, while there is an itemization requirement in the statutes and regulations governing periodic disclosures, the same requirement is not included in the statutes and regulations applicable to renewal notices. See 12 C.F.R. § 1026.7(b)(6)(iii). Moreover, the Court held that renewal notices are not subject to the same disclosure requirements as solicitations and applications, which are provided to consumers before the parties have any relationship. At account renewal, TILA and Regulation Z require only that a creditor disclose terms "that would apply if the account were renewed." 15 U.S.C. § 1637(d)(1)(B); 12 C.F.R. § 1026.9(e)(i); see also 12 C.F.R. § 1026, Supp. I, Part 1, cmt. 9(e), ¶ 3.    


Accordingly, the Third Circuit held that TILA did not require the bank to itemize in the renewal notice the fees to be paid to keep the consumer's account open. Thus, the Court affirmed the trial court's dismissal of the consumer's complaint.




Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874


Admitted to practice law in Illinois




Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC



NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:


Financial Services Law Updates




The Consumer Financial Services Blog