The Supreme Court unanimously ruled today that JPMorgan Chase & Co did not have to provide written notice before increasing interest rates for account holders who defaulted on their credit card payment.
The class-action lawsuit was filed in 2004, five years before the passage of the CARD Act. The CARD Act changed the notification requirements for interest rates hikes, requiring that cardholders now receive 45 days notice on any increase, including default. This decision will likely have little impact on future cases but it will impact pending cases.
In the suit Chase Bank USA v. McCoy, James McCoy accused Chase of violating federal law by retroactively increasing his interest rates after his account was closed following a late payment. Chase argued that its cardmember agreement documented the conditions that McCoy had to adhere to in order to retain the lower interest rate, in addition to the maximum interest rate that could be levied if he violated those terms.
The Supreme Court ruled that under the old federal regulations, the Chase cardmember agreement disclosed the terms of interest rates and the maximum rates that would apply if the terms were violated. Therefore, Chase did not have to provide written notice before raising credit card interest rates to account holders who defaulted on a payment.
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