William Krieger v. Bank of America NA
890 F.3d 429 (2018)
Rule of Law:
When a creditor removes a disputed charge from a consumer's billing statement and later reinstates it, the 60-day period for the consumer to provide written notice of a billing error under the Fair Credit Billing Act (FCBA) begins upon receipt of the first statement reflecting the reinstated charge. Additionally, a credit card issuer imposes "liability" on a cardholder for an unauthorized charge, thereby triggering the $50 liability limit and other statutory requirements of 15 U.S.C. § 1643, when it bills or rebills the cardholder for that charge, which can be enforced through TILA's private right of action under 15 U.S.C. § 1640.
Facts:
- In June 2015, William Krieger's home computer stopped working, and an individual posing as a Microsoft employee remotely accessed it, during which Krieger saw his Bank of America credit card number flash across the screen.
- Krieger called Bank of America (BANA) and learned a $657 Western Union money transfer had just been purchased on his card, which he immediately protested as unauthorized.
- Krieger received his July 29 BANA statement, which included the $657 charge, and upon calling BANA again, expressed a desire to cancel his account.
- BANA subsequently called Krieger back, offered to credit his account while conducting an investigation, and sent a letter confirming a $657 credit, stating it considered the dispute resolved.
- Krieger's mid-August statement reflected a "-$657" credit, leading him to believe the matter had been resolved.
- In mid-September, BANA sent Krieger a letter advising that Western Union had provided verification, deemed the charge valid, and would rebill the $657 charge, which then appeared on his September 18 statement.
- Krieger, in turn, promptly sent BANA a detailed two-page letter, received September 29, again emphasizing the charge was unauthorized and requesting its removal.
- To avoid late fees and interest, Krieger paid BANA the entire $657 after BANA denied his request to remove the charge.
Procedural Posture:
- William Krieger originally filed a complaint in state court against Bank of America (BANA).
- BANA removed the case to the United States District Court for the Middle District of Pennsylvania.
- Krieger filed an amended complaint alleging BANA violated the Fair Credit Billing Act (FCBA) and TILA's unauthorized-use provision, seeking statutory and actual damages under 15 U.S.C. § 1640.
- The District Court granted BANA's motion to dismiss Krieger's complaint with prejudice for failure to state a claim, ruling that his FCBA notice was untimely and that 15 U.S.C. § 1643 did not provide a private cause of action for reimbursement.
- Krieger timely appealed the District Court's dismissal to the United States Court of Appeals for the Third Circuit.
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Issue:
1. Does the 60-day period for a consumer to submit written notice of a billing error under the Fair Credit Billing Act (FCBA) begin from the initial statement reflecting the charge, or does it reset when a creditor removes the charge and then reinstates it on a later statement? 2. Does a credit card issuer "impose liability" on a cardholder for unauthorized charges under 15 U.S.C. § 1643—thus triggering the $50 liability limit and allowing a private right of action under 15 U.S.C. § 1640—when it bills or rebills the cardholder for the full amount of an allegedly unauthorized charge after receiving notice?
Opinions:
Majority - Krause, Circuit Judge
Yes, the 60-day period for a consumer to submit written notice of a billing error under the Fair Credit Billing Act (FCBA) resets when a creditor removes a disputed charge from a billing statement and then reinstates it on a later statement, beginning from the receipt of the first statement reinstating the charge. The court's reasoning is rooted in the FCBA's text, which requires a consumer to dispute a billing error only where they "belie[ve] that [his] statement contains a billing error" (15 U.S.C. § 1666(a)(2)). When BANA removed the charge and issued a credit, a reasonable consumer like Krieger had no reason to believe his statement contained an error and thus no reason to file a dispute; he reasonably believed the matter was resolved. To hold otherwise would impose an ongoing duty on consumers to dispute seemingly resolved issues and allow creditors to circumvent FCBA obligations by temporarily removing charges. The court also clarified that Regulation Z's language about the "first periodic statement that reflects the alleged billing error" (12 C.F.R. § 1026.13(b)(1)) applies to charges that are continuously carried forward, not to those that are removed and later reinstated, as such a reading aligns with common sense, consumer protection policies, and the principle that ambiguities in disclosures should favor the consumer. Yes, a credit card issuer "imposes liability" on a cardholder for unauthorized charges under 15 U.S.C. § 1643—thus triggering the $50 liability limit and allowing a private right of action under 15 U.S.C. § 1640—when it bills or rebills the cardholder for the full amount of an allegedly unauthorized charge after receiving notice. The court found that TILA's private right of action (§ 1640) explicitly applies to "any requirement" of § 1643, including the $50 liability limit. The court distinguished its prior cases, Sovereign Bank and Azur, by clarifying that they did not address an issuer's violation of § 1643 by imposing over $50 liability or a cardholder's right to recover "actual damages" under § 1640 for such a violation. It rejected BANA's argument that "liability" is only imposed through the litigation process (i.e., suing a cardholder), emphasizing that a cardholder is legally obligated to pay charges on their bill. This narrow interpretation of "liability" would contradict § 1643's text, structure, and purpose of consumer protection by forcing cardholders to choose between risking late fees by not paying a disputed charge or forfeiting their limited liability rights by paying it. Such an interpretation would also unfairly penalize unsophisticated consumers or those with automatic payment plans, contravening the statute's intent to protect the "reasonable consumer."
Analysis:
This case significantly clarifies and strengthens consumer protections under both the Fair Credit Billing Act (FCBA) and the Truth in Lending Act (TILA). The ruling prevents creditors from manipulating the FCBA's 60-day dispute window by temporarily removing and then reinstating disputed charges, ensuring that consumers are not unfairly stripped of their rights. By affirming that billing or rebilling for an unauthorized charge constitutes "imposing liability" under TILA Section 1643, the court closes a potential loophole that could have forced consumers to refuse payment and risk negative credit implications to assert their statutory $50 liability limit. This decision encourages credit card issuers to conduct thorough investigations and adhere strictly to consumer protection laws, especially for cardholders who responsibly pay their bills or use automatic payment systems.
