1 The Credit Card System

Question 1

What are two options (rights) a credit card holder might have in disputing a CC payment?

Answer 1

1) The right to withhold payment under TILA [§170(a); 15 USC §1666i]; &
2) Right to assert claims under TILA

Question 2

What are the general limits on the right to withhold payment under TILA?

Answer 2

a) It is only a right to withhold from the issuer ; it is not a right to force a refund (chargebacks);
b) Initial transaction must exceed $50;
c) CH must make a good faith attempt to resolve the issue with the merchant directly;
d) Transaction must occur within CH’s state of residence or within 100 miles from CH’s billing address

Question 3

What is the order that payments to a CC are applied to the balance due? What is the exception??

Answer 3

FIFO; unless there is notice that the CH is withholding on a charge (excludes withheld charge from payment)

Question 4

What is the significance between a personal and business credit card transaction when the issue of disputing or withholding payment arises? How is the character determined?

Answer 4

Withholding right does not apply to business or commercial lines of credit because such transactions are exempt under TILA.

RULE: Credit transactions involving extensions of credit primarily for business are exempt transactions. [§ 104; 15 USC §1603(1)]

Question 5

Mincks:
Open end consumer plan;
initial transaction is the extension of credit,
afterwards a business transaction for postcards
Is it exempt?

Answer 5

When an open end consumer credit plan is involved, 15 U.S.C.S. § 1666i explicitly authorizes a cardholder to assert a defense against the card issuer arising out of any transaction in which the credit card is used as a method of payment or extension of credit. 15 U.S.C.S. § 1666i(a). Since the appellate court is required to liberally construe the statutory language in the cardholder’s favor, the court interprets the phrase, “any transaction,” to mean exactly what it says. So long as a credit card was used to make a purchase on an open end consumer credit plan, the claims and defenses rule in 15 U.S.C.S. § 1666i applies to “any transaction” meeting the other requirements set forth in the statute. Any less expansive interpretation of this phrase would constitute a strict, rather than a liberal, construction of this remedial statute.

Citibank v. Mincks, 135 S.W.3d 545, 548 (Mo. Ct. App. 2004)