"Credit Cards" that
Aren't
Some retail stores and direct mail companies will push hard for you to apply
for what they call a “credit card” to buy their products. But
be warned: These credit cards sometimes aren’t.
The January 2000 Mississippi federal court decision Willie and Emma Oliver
v. Bank One, N.A. dealt with one such scheme.
The Olivers bought a television home satellite system from a door-to-door
salesman. The purchase was financed by the issuance of a “credit card”
by Bank One in May 1995.
Bank One furnished disclosures pursuant to the TILA, as though the credit
transaction was an opened-end or revolving credit facility…what most
people think of as a credit card. But there were some differences. The limit
on the card was almost exactly the purchase price; and no business other than
the satellite company would accept the card.
The Olivers didn’t like the satellite system and eventually stopped
making payments on the card by which they’d bought it. As a result,
Bank One posted a negative item on their credit report. The Olivers sued Bank
One.
Since the card couldn’t be used anywhere, the Olivers argued that the
deal should have been treated as a closed-end credit purchase. This would
have made returning the system easier. Their lawyers argued that Bank One’s
failure to set the deal up as a closed-end transaction violated the disclosure
requirements of TILA. The trial court noted:
The purpose of the TILA is to protect the consumer from inaccurate
and unfair credit practices, and “to assure a meaningful disclosure
of credit terms so that the consumer will be able to compare more readily
the various credit terms available to him and avoid the uninformed use of
credit.”
The Olivers argued that Bank One’s negative credit report constituted
an “action to collect the debt” and was therefore covered by the
TILA. But the trial court ruled that “merely providing a negative credit
report does not constitute an action attempting to collect the debt under
the TILA.”
The court also ruled that the TILA’s one-year statute of limitation
prevented the Oliver’s claims:
[Bank One] provided open-ended credit disclosures to the [Olivers}
in connection with their purchase of a satellite dish system in May 1995,
and the [Olivers] filed this cause in February 1999, nearly four years after
the date of the alleged violation. As such, the dismissal of this action
is further appropriate….
So, if you think you’ve got a TILA complaint, make sure to contact
a lawyer within one year.
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