Ninth Circuit Holds Omission of Annual Fee in Credit Card Advertisements, Online Application Not Misleading

Credit Cards TILA Class Action

On August 31, the U.S. Court of Appeals for the Ninth Circuit upheld a district court’s dismissal of a putative class action alleging that a credit card issuer and a retailer violated California law when they failed to explicitly state the card’s annual fee in advertisements. Davis v. HSBC Bank Nevada, N.A., No. 10-56488, 2012 WL 3804370 (9th Cir. Aug. 31, 2012). The cardholder applied for a credit card that offered rewards for purchases, to be used at the retailer’s stores. Neither the advertisement for the card nor the application website mentioned that the card required an annual fee. The fee was disclosed only in the “Terms and Conditions” that the cardholder acknowledged having read and accepted prior to opening the credit account. On appeal, the cardholder argued that the omission of the annual fee in the advertisements, combined with the promise of rewards, constituted false advertising because it implied that no offsetting charges would erode the rewards. The court held that the advertisement was unlikely to deceive a reasonable consumer, even though it is possible that some people could misunderstand the terms. The court also rejected the cardholder’s argument that the issuer and retailer fraudulently concealed the fee. In doing so the court drew a distinction from its earlier decision in Barrer v. Chase Bank, N.A., 566 F.3d 883 (9th Cir. 2009), in which it held that a provision granting the issuer the right to alter the cardholder’s APR was buried in fine print and therefore violated TILA’s “clear and conspicuous” requirement. The court explained that its decision in Barrer had no bearing on the cardholder’s instant common law claims. Finally, the court rejected the cardholder’s claim that the online application and advertisements violated the state’s Unfair Competition Law because the online application is protected by a federal safe harbor and the advertisements were not deceptive.