A New York Federal court has certified a class action against Ann Taylor LOFT for violations of the Truth in Lending Act (see Opinion & Order in Kelen v. World Financial Network National Bank, Case No. 12-CIV-5024).
Lead Plaintiff Ester Kelen brought suit on behalf of herself and others similarly situated, alleging that the account opening form they received upon opening a private label credit card at LOFT violated TILA by inaccurately disclosing certain information and omitting required information in its Billing Rights Notice (see Complaint in Kelen v. World Financial Network National Bank, Case No. 12-CIV-5024). Seeking up to $1 m for each of the bank’s failures, Kelen complained of several deviations in the Billing Rights Notice at issue from the model promulgated under the applicable federal regulations (see 12 C.F.R. Part 226 Supp. I, Appendix G-3(A), 12 C.F.R. Part 1026 Supp. I, Appendix G-3(A)) . First, the Notice omitted the warning that if a customer thinks there has been an error on a periodic billing statement, the customer must contact the credit card company at least 3 days before an automated payment is scheduled, if the customer wishes to stop payment on the amount believed to be wrong. Second, the Notice stated that the Bank must acknowledge the billing error notice within 30 days unless it has corrected the error by then; in fact, federal regulations require such acknowledgment even if the error has been corrected by that time. Third, the Billing Rights Notice omitted the following required language: “If all of the criteria above are met and you are still dissatisfied with the purchase, contact us in writing . . . While we investigate, the same rules apply to the disputed amount as discussed above. After we finish our investigation, we will tell you our decision. At that point, if we think you owe an amount and you do not pay, we may report you as delinquent.”
The Court found that the requirements of Rule 23(a) of numerosity, commonality, typicality, and fair and adequate representation were all met. Similarly, the Court found that the requirements of Rule 23(b)(3) were also met, namely that common questions of law or fact predominate and that a class action would be superior to other methods of adjudication. Importantly, the class was certified despite the fact that there are no allegations in the Complaint that any members of the class were actually injured by the above omissions, but only that they received the Billing Rights Notice in violation of TILA, underscoring the importance of compliance with TILA’s provisions to the letter. Notably, the Court was not concerned about the relationship between lead plaintiff Kelen and class counsel. Counsel had represented Kelen in four prior class actions (2 of which also involved credit card disclosures), and represented a business entity owned by Kelen and her husband. The Court noted that the same team had been successful in prior class actions and thus their history indicated that the present class would likely benefit from their efforts to vindicate the class’s rights under TILA.
It is interesting to contrast the Court’s decision with another decision from the S.D.N.Y. which dismissed a TILA class action, finding that statutory damages are not available for violations of the implementing regulations under TILA and noting that technical violations of TILA without actual damages are not actionable (see Opinion & Order in Schwartz et al. v. HSBC Bank USA, N.A., Case NO. 13-CIV-769). In fact, Kelen, in a previous suit against World Financial Newtork National Bank (this time over credit cards issued at Dress Barn), had her claims under TILA dismissed for just such reasons (see Kelen v. World Financial Network National Bank, 763 F.Supp.2d 391 (S.D.N.Y. 2011).
In short, while it has been reported that TILA claims are on the decline, dropping some 89 percent in the last 4 years, this decision emphasizes that credit card issuers must continue to be vigilant in following the dictates of TILA and its implementing regulations.