Must a Creditor Comply With the Truth In Lending Act ?
Should a Creditor Comply With the Truth In Lending Act as Amended by the Fair Credit Bill Act for Correction of Billing Errors ?
In American Express Co. v. Koerner (1981) 452 U.S. 233, 243 101 S. Ct. 2281, 2887, 68 L. Ed. 2d 803, 807, at issue was whether a creditor must comply with the Truth in Lending Act, as amended by the Fair Credit Bill Act, to the correction of billing errors, when both a corporation and an individual officer are liable for a debt and the credit card company issued credit cards pursuant to an application for a "company account." (Id. at p. 234 101 S. Ct. at pp. 2282-2283, 68 L. Ed. 2d at p. 806.)
Considering the definitions of the terms "credit" and "consumer," the court concluded that an "extension of credit" may occur in either of two ways.
A credit card company extends credit when it opens or renews an account because it grants a right "to incur debt and defer its payment."
A credit card company also extends credit when the card is used to make purchases because the credit card company has allowed the cardholder " 'to defer payment of debt.' " (American Express Co. v. Koerner, supra, 452 U.S. at p. 241 101 S. Ct. at p. 2286, 68 L. Ed. 2d at pp. 810-811.)
The court recognized that if "extension of credit" means the creation or renewal of an account, the overall purpose of the account at the time of issuance must be considered but not at the time of a purchase or transaction.
The court said:
"it is clear that some consideration of the overall purposes of a credit card account, not merely of individual transactions, is necessary under . . . section 1666" because its application to some billing errors does not arise from a particular transaction and is possible only when the creation of the credit card account is classified as an extension of consumer credit. ( American Express Co. v. Koerner, supra, 452 U.S. at p. 242, fn. 10 101 S. Ct. at p. 2287, 68 L. Ed. 2d at p. 811.)
Such instances include charges for extensions of credit that were never made, failure to reflect payments that were made, and errors in computation.
The court reasoned that these type of errors do not arise from the use of a credit card.