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San Diego Case By Case: Bait-and-Switch Credit Card Offer

In San Diego, there are many banks which issue credit cards. It is very important to review all of the terms and conditions of any credit card offer before and after approval. This is not a San Diego case, however the issue which arises has also arisen for many San Diego residents. Our law firm of Law Office of Scott C. Soady, A Professional Corporation offers a complimentary consultation by phone or e mail. If we cannot assist you, we will refer you to the San Diego County Bar Association Lawyer Referral Service which can refer a qualifiied attorney in the specific area of law you require.

In a variation on the typical “bait-and-switch” scheme, a bank made a promotional offer of a “no annual fee” credit card, then changed the terms mid-year to require such a fee. A credit card holder sued the bank under the federal Truth in Lending Act (TILA). She alleged a violation of the requirement in TILA that an issuer of a credit card disclose the terms of the card accurately and without misleading statements. A federal court allowed the lawsuit to continue.

Both the advertisement soliciting customers for the credit card and the card holder agreement stated that no annual fee would be charged, but the agreement also stated more generally that the bank had the right to change any of the terms at any time. The bank maintained that the latter provision gave it the right to impose an annual fee whenever it wanted.

In ruling for the credit card holder, the court found that a reasonable consumer was entitled to assume that the issuer of the credit card would refrain from imposing an annual fee for at least one year. Given the apparent intent of the bank to begin an annual fee after the “bait” had been taken, the statement of “no annual fee” was misleading and in violation of TILA. If the bank had wished to reserve the right to impose an annual fee later, notwithstanding the “no annual fee” solicitation, further clarification would have been necessary to comply with TILA.

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