Tricky Accounting
Under the method of payment allocation used by MBNA, Broder’s cash
advances subject to the 6.9 percent rate were reduced by the amount of his
monthly payments while his purchase balances remained wholly unpaid and
continued to accrue finance charges at the higher rate.
As a result, Broder was charged finance charges by MBNA on his purchase balance
during the six-month limited period covered by the $25,000 cash advance totaling
$767—even though his payments each month were enough to pay off the
purchases in full. Broder argued that finance charges should have been only
$313 on the balance transfer amount. So, he claimed MBNA had charged him $450
more than it should have.
He claimed that MBNA had used the same tricky accounting to overcharge him
about $200 on the $35,000.
When Broder couldn’t get any satisfaction from MBNA directly, he sued.
(Unfortunately, for MBNA, Broder was an attorney who specialized in class
action lawsuits.) His lawsuit contained three charges: breach of contract,
fraud and violation of New York business law barring deceptive practices and
false advertising. He also asked the court to certify his lawsuit as a class
action, open to any MBNA cardholders who accepted the special balance transfer
offers.
MBNA fought aggressively, asking the court to throw out Broder’s whole
case. It argued that it didn’t breach the agreement with plaintiff and
that the advertisements were neither false nor misleading. MBNA pointed to
its cardholder agreement that stated payments “will be allocated in
a manner we determine” and language in the solicitation materials stating
that it could allocate payments first to the cash advance balance and than
to the purchase balance.
The court agreed that MBNA didn’t breach the literal terms of its contract
with Broder. But, it ruled that Broder had made viable claim for breach of
the implied covenant of good faith.
The court looked at the brochures that MBNA had used and concluded:
…there are issues of fact resulting from ambiguous language contained
in the cardmember agreement and the solicitation. Ambiguities are construed
against the drafters of the relevant materials.
Next: The Law On Fine
Print |
