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In a major victory for banks, a federal judge in the Eastern District of Pennsylvania has ruled that credit card holders cannot sue under the Truth in Lending Act over an alleged “bait and switch” in which they say they were promised a card with no annual fee only to learn six months later that a fee was being imposed. In his seven-page opinion in Rossman v. Fleet Bank, U.S. District Judge Bruce W. Kauffman found that the TILA has a narrow scope and requires only that banks disclose all of the terms that will apply to credit card holders on the day they receive the card. “If as alleged, Fleet lured consumers into opening credit card accounts with relatively favorable terms while intending to switch those terms shortly thereafter, then Fleet unquestioningly engaged in wrongdoing. But wrongdoing alone does not automatically trigger application of the TILA’s provisions,” Kauffman wrote. Kauffman found that Fleet’s disclosures in the solicitations it sent to consumers in late 1999 were “accurate with respect to the terms offered at that time; the fact that Fleet allegedly intended to change those terms in the near future did not render the disclosures inaccurate for purposes of the TILA.” Plaintiffs’ attorney Michael D. Donovan of Philadelphia’s Donovan Miller was dismayed and said he and the other lawyers on his team are considering an appeal. “This decision interprets the Truth in Lending Act to mean that it’s OK to outright lie. … If TILA means anything, it means that you can’t lie when you send out the initial solicitation,” Donovan said. In the suit, lead plaintiff Paula Rossman claims she responded to a Fleet solicitation that pitched a credit card with no annual fee, but that Fleet added a $35 annual fee just six months later. (A second class-action suit is pending against Fleet brought by consumers who say the company promised a low interest rate, but raised it soon after. No rulings have been issued in that case.) Fleet’s explanation for the annual fee was that the Federal Reserve Board had recently raised interest rates. But the suit alleges that Fleet planned all along to impose a fee if interest rates rose. But Fleet’s lawyers, Alan S. Kaplinsky and Burt M. Rublin of Philadelphia-based Ballard Spahr Andrews & Ingersoll, argued that the plaintiffs were trying to stretch TILA to fit an ordinary fraud case so they could bring a class action in federal court. Courts have routinely rejected such TILA claims, they said, and have strictly construed the federal law to apply only where the allegedly false statements were false at the time they were made. In Fleet’s motion to dismiss the federal claim, Rublin and Kaplinsky cited a decision from the 7th U.S. Circuit Court of Appeals that said TILA “is not a general prohibition of fraud in consumer transactions or even in consumer credit transactions.” Even if Fleet had engaged in a “bait and switch” scheme to hide its true intention of imposing an annual fee, they said, such a claim might properly be brought as a fraud claim or as a violation of consumer protection law, but not under TILA. In a footnote, the defense team insisted that the plaintiffs’ motive for adding the TILA claim was to get into federal court and to get fees for the lawyers. “Plaintiff is undoubtedly attempting to contrive a TILA claim here because TILA provides for the recovery of attorneys’ fees and also because she believes that it will be less difficult to obtain certification of a nationwide class under TILA than under her state law claims,” Rublin and Kaplinsky wrote. “The gravamen of plaintiff’s complaint is fraud, and her effort to dress up the fraud claims in TILA garb should be rejected,” they wrote. In defending the TILA claim, Fleet also offered a more general defense for its actions, noting that consumers were clearly advised that the terms of a credit card can change at any time. The solicitation materials stated: “We reserve the right to change the benefit features associated with your Card at any time.” And when the card arrived in the mail, the agreement that came with it was even more explicit, saying: “We have the right to change any of the terms of this Agreement at any time.” But a national team of plaintiffs’ lawyers — Michael Donovan and David A. Searles of Donovan Miller; Andrew S. Kierstead of Huron Zieve & Kierstead in Portland, Ore.; Timothy E. Eble of Ness Motley Loadholt Richardson & Poole in Mount Pleasant, S.C.; and John H. Bright of Keller Rorhback in Seattle — pointed to language in TILA and its regulations that, they said, allows a claim over such a bait and switch. One regulation, they said, specifically requires banks to disclose any fee that “may be imposed.” But Judge Kauffman rejected the argument that the term “may be imposed” should be read to include a fee that “might be imposed in the future.” Turning to the dictionary, Kauffman said: “Although the term `may’ can be used to connote possibility, the term can also be used to connote permission.” Kauffman opted for the latter, quoting and emphasizing a portion of the “official interpretations” of the regulation that say the bank’s disclosures “should reflect the credit terms to which the parties are bound at the time of giving the disclosures.”

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