Alert September 05, 2012

The Ninth Circuit Affirms Retailer Credit Card Online Disclosures Comply with TILA

The Ninth Circuit affirmed a lower court’s ruling that a retailer’s online credit card disclosures complied with the Truth in Lending Act and, therefore, created a safe harbor for the retailer. Plaintiff filed a class action alleging, among other things, violations of California’s unfair competition law. Plaintiff completed a credit card application using defendant’s online credit application. Several times during the application process, plaintiff was directed to the retailer’s disclosures and checked the box that he had agreed to the terms—which included an annual fee. However, once he received his credit card, plaintiff “was surprised” to learn that the credit card had an annual fee. Plaintiff alleged that the retailer’s disclosures of the annual fee were inadequate and in violation of California unfair competition law. The retailer argued that because the annual fee disclosure complied with and was required by TILA and Regulation Z, its conduct fell within a “safe harbor” that was “impervious to [the state law violation].” The Ninth Circuit agreed. Citing the California Supreme Court in Cel-Tech Comms., Inc. v. Los Angeles Cellular Telephone Co., 973 P.2d 527, 541 (Cal. 1999), the Court held that under the safe harbor doctrine, “[t]o forestall an action under the [California] unfair competition law, another provision must actually ‘bar’ the action or clearly permit the conduct.” According to the Court, TILA and Regulation Z provide such a safe harbor for the retailer’s online disclosures.