Virginia F. Miller v. American Express Company
1982 U.S. App. LEXIS 25320, 688 F.2d 1235 (1982)
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Rule of Law:
The Equal Credit Opportunity Act (ECOA) and its implementing regulations (12 C.F.R. § 202.7(c)) prohibit a creditor from automatically terminating a supplementary cardholder's account upon the death of the basic cardholder, when the supplementary cardholder is contractually liable, without evidence of their inability or unwillingness to repay, as such an action constitutes discrimination on the basis of marital status.
Facts:
- In 1966, Maurice Miller obtained an American Express Basic Card Account.
- Later in 1966, Virginia Miller applied for and was granted a supplementary card, with her application signed by both her and Maurice Miller.
- Virginia Miller agreed to be personally liable for all charges made on her supplementary card, which bore a different account number, was issued in her own name, required a separate annual fee, and had a different expiration date than Maurice Miller's card.
- The Millers used their American Express cards until Maurice Miller passed away in May 1979.
- Two months after Maurice Miller's death, Virginia Miller attempted to use her card and was informed by a store clerk that her account had been cancelled, which was her first notice of the cancellation.
- American Express subsequently informed Virginia Miller that her account was cancelled pursuant to a policy of automatically terminating a supplementary cardholder’s account upon the death of the basic cardholder.
- American Express invited Virginia Miller to apply for a new basic account, which she received by filling out a short form without providing financial or credit history data, apparently based on her thirteen-year credit history with Amex.
Procedural Posture:
- Virginia Miller brought an action in district court (trial court) alleging a violation of the Equal Credit Opportunity Act (ECOA) against American Express.
- In the district court, Virginia Miller and American Express filed cross motions for summary judgment on the issue of liability.
- The district court granted American Express’s motion for summary judgment without specifying its reasons.
- Virginia Miller appealed the district court's grant of summary judgment to the Ninth Circuit Court of Appeals (intermediate appellate court).
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Issue:
Does a creditor's automatic cancellation of a supplementary credit card account upon the death of the basic cardholder, where the supplementary cardholder is contractually liable for charges, violate the Equal Credit Opportunity Act (ECOA) and 12 C.F.R. § 202.7(c) by discriminating on the basis of marital status?
Opinions:
Majority - BOOCHEVER, Circuit Judge
Yes, American Express’s policy of automatically cancelling a supplementary cardholder’s account upon the death of the basic cardholder violates the Equal Credit Opportunity Act (ECOA) and its implementing regulations. The ECOA (15 U.S.C. § 1691(a)(1)) makes it unlawful for creditors to discriminate on the basis of marital status, and 12 C.F.R. § 202.7(c)(1) specifically prohibits terminating an account of a person contractually liable on an existing open-end account due to a change in marital status without evidence of inability or unwillingness to repay. Mrs. Miller's card was cancelled solely because her marital status changed from married to widowed, and Amex presented no evidence that her widowhood rendered her unable or unwilling to pay; indeed, her prompt re-issuance suggested creditworthiness. The court found that the Federal Reserve Board had the authority to promulgate § 202.7(c), as the ECOA's purpose was to prevent credit decisions based on factors irrelevant to creditworthiness, such as marital status, and Congress intended broad flexibility for the Board to define prohibited conduct. Furthermore, Mrs. Miller was deemed "contractually liable on an existing open end account" because she was personally responsible for all debts on her supplementary card, which was functionally a separate account from her husband's. The court emphasized that specific discriminatory intent or a statistical showing of adverse impact is not always necessary for an ECOA violation; a creditor's conduct in an individual transaction, if it falls within the prohibitions of the regulation, is sufficient. Amex's termination of Mrs. Miller's account solely due to her husband's death, without assessing her creditworthiness, directly violated the ECOA and its regulations.
Dissenting - POOLE, Circuit Judge
No, American Express’s policy of cancelling a supplementary cardholder’s account upon the death of the basic cardholder did not violate the ECOA because the cancellation was not "on the basis of" Mrs. Miller's change in marital status. While agreeing with the majority that supplementary cardholders are "contractually liable," the dissent argued that the Act and Section 202.7(c) prohibit only terminations because of a change in marital status. American Express's policy uniformly cancels basic and all supplementary cards upon the basic cardholder's death, regardless of the supplementary cardholder's relationship (e.g., sibling, child, spouse), because the basic cardholder can no longer meet their obligations. This is a neutral policy, evenhandedly applied, and the fact that the death also changed Mrs. Miller's marital status was incidental to the basis for cancellation. The dissent contended that the Act's purpose is to eradicate discriminatory credit practices where applicants are treated differently due to factors like sex or marital status. The majority's holding, it argued, requires preferential treatment for widowed supplementary cardholders, which is contrary to the Act's goal of preventing discrimination rather than mandating special treatment.
Analysis:
This case significantly clarifies the scope of the Equal Credit Opportunity Act (ECOA) by establishing that a creditor's policy can constitute marital status discrimination even without proof of specific discriminatory intent or a statistical showing of adverse impact. It reaffirms the Federal Reserve Board's authority to define specific credit practices as discriminatory through regulations like 12 C.F.R. § 202.7(c). The ruling indicates that automatic account terminations triggered by a change in marital status are impermissible unless the creditor can demonstrate the individual's inability or unwillingness to repay, shifting the burden onto the creditor to assess individual creditworthiness rather than relying on blanket policies. This precedent impacts how creditors structure policies for joint accounts or supplementary cards, requiring them to review individual liability and creditworthiness before taking adverse action based on changes in a related party's status.
