William Krieger v. Bank of America NA , 890 F.3d 429 ( 2018 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 17-1275
_______________
WILLIAM KRIEGER,
Appellant
v.
BANK OF AMERICA, N.A.
_______________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(M.D. Pa. No. 4-16-cv-00830)
Honorable Matthew W. Brann, U.S. District Judge
_______________
Argued: September 27, 2017
Before: AMBRO and KRAUSE, Circuit Judges, and CONTI,
Chief District Judge
(Opinion Filed: May 16, 2018)

The Honorable Joy Flowers Conti, Chief United
States District Judge for the Western District of Pennsylvania,
sitting by designation.
Brett M. Freeman [Argued]
Carlo Sabatini
Sabatini Law Firm
216 North Blakely Street
Dunmore, PA 18512
Counsel for Appellant
Michael C. Falk [Argued]
Reed Smith LLP
1717 Arch Street, Suite 3100
Three Logan Square
Philadelphia, PA 19103
Counsel for Appellee
_______________
OPINION OF THE COURT
_______________
KRAUSE, Circuit Judge.
The same day Appellant William Krieger fell victim to
a credit card scam and discovered a fraudulent $657 charge
on his bill, he protested to his card issuer, Bank of America
(BANA),1 and was told both that the charge would be
removed and that, pending “additional information,” BANA
considered the matter resolved. And indeed, Krieger’s next
bill reflected a $657 credit. But over a month later Krieger
opened his mail to some particularly unwelcome additional
1
We refer here to Appellee as “BANA” as that is how
Bank of America refers to itself throughout its briefing.
2
information: BANA was rebilling him for the charge. He
disputed it again, this time in writing, but after BANA replied
that nothing would be done, he paid his monthly statement
and then filed this action, alleging BANA violated two
consumer protection laws: the Fair Credit Billing Act, which
requires a creditor to take certain steps to correct billing
errors, and the unauthorized-use provision of the Truth in
Lending Act, which limits a credit cardholder’s liability for
the unauthorized use of a credit card to $50. The District
Court granted BANA’s motion to dismiss the operative
complaint after determining Krieger had failed to state a
claim as to either count. Because we conclude the District
Court’s decision was contrary to the text, regulatory
framework, and policies of both statutes, we will reverse.
I. Background
A. Statutory Background
Congress enacted the Truth in Lending Act (TILA or
Act), Pub. L. No. 90-321, 82 Stat. 146 (1968) (codified as
amended at 15 U.S.C. §§ 1601–1667f), in response to
“widespread consumer confusion about the nature and cost of
credit obligations.” Gennuso v. Commercial Bank & Tr. Co.,
566 F.2d 437, 441 (3d Cir. 1977). TILA’s express purpose is
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.” 15 U.S.C. § 1601(a). Serving to “even the often
slanted credit and lending playing field,” Vallies v. Sky Bank,
432 F.3d 493, 495 (3d Cir. 2006), as amended on reh’g (Feb.
1, 2006), and to “guard against the danger of unscrupulous
lenders taking advantage of consumers through fraudulent or
otherwise confusing practices,” Ramadan v. Chase
3
Manhattan Corp., 156 F.3d 499, 502 (3d Cir. 1998), the Act,
in simplest terms, “reflects a transition in congressional
policy from a philosophy of ‘Let the buyer beware’ to one of
‘Let the seller disclose,’” Mourning v. Family Publ’ns Serv.,
Inc., 411 U.S. 356, 377 (1973).
To further that policy, TILA generally requires that a
creditor in a consumer transaction disclose, among other
things: “(1) the identity of the creditor; (2) the amount
financed; (3) the finance charge; (4) the annual percentage
rate; (5) the sum of the amount financed and the finance
charge, or total of payments; [and] (6) the number, amount,
and due dates or period of payments scheduled.” Cappuccio
v. Prime Capital Funding LLC, 649 F.3d 180, 188 (3d Cir.
2011), as amended (Sept. 29, 2011) (internal quotation marks
omitted). Creditors also must provide “explanations and
definitions” of each of those terms, id., as well as information
regarding “borrowers’ rights,” Koons Buick Pontiac GMC,
Inc. v. Nigh, 543 U.S. 50, 54 (2004). All of this information,
the Act mandates, must be disclosed “clearly and
conspicuously,” that is, “in a reasonably understandable form
and readily noticeable to the consumer.” Rossman v. Fleet
Bank (R.I.) Nat’l Ass’n, 280 F.3d 384, 390 (3d Cir. 2002).
While TILA offers a “range of remedies to achieve its
goals,” Vallies v. Sky Bank (Vallies II), 591 F.3d 152, 156 (3d
Cir. 2009), central among them are consumer suits, which
Congress sought to “encourag[e] . . . to deter violations of the
Act,” Johnson v. W. Suburban Bank, 225 F.3d 366, 374–75
(3d Cir. 2000). TILA provides a private right of action, 15
U.S.C. § 1640(a), to all “consumers who suffer damages as a
result of a creditor’s failure to comply with TILA’s
provisions.” Household Credit Servs., Inc. v. Pfennig, 541
4
U.S. 232, 235 (2004). Section 1640(a) permits recovery of
actual damages, statutory damages, costs, and attorneys’ fees,
and, as relevant here, may be used as a basis for a claim
against “any creditor who fails to comply with any
requirement imposed under [15 U.S.C. §§ 1631–1651],
including any requirement under . . . [15 U.S.C. §§ 1666–
1666j].”
This case involves two of those requirements: (1) a
TILA provision known as the “Fair Credit Billing Act,”
which requires a creditor to comply with particular
obligations when a consumer has asserted that his billing
statement contains an error, 15 U.S.C. § 1666; and (2) TILA’s
unauthorized-use provision, which requires a credit card
issuer to satisfy certain conditions before holding a
cardholder liable for the unauthorized use of a credit card,
including limiting the cardholder’s liability to $50, 15 U.S.C.
§ 1643.
1. The Fair Credit Billing Act
Shortly after enacting TILA, Congress amended it by
way of the Fair Credit Billing Act (FCBA), Pub. L. No. 93-
495, 88 Stat. 1511 (1974) (codified as amended at 15 U.S.C.
§§ 1666–1666j). Building on TILA’s original goal of
“requir[ing] . . . full disclosure of credit charges . . . so that
the consumer can decide for himself whether the charge is
reasonable,” S. Rep. No. 90-392, at 1 (1967), the FCBA aims
to “protect the consumer against inaccurate and unfair credit
billing and credit card practices,” 15 U.S.C. § 1601(a). As
relevant here, the FCBA imposes on creditors
“requirements . . . for the correction of billing errors.” Am.
Express Co. v. Koerner, 452 U.S. 233, 234 (1981).
5
The “primary” such requirement, at issue in this case,
is that if a creditor receives “written notice” from a consumer
that “indicates [his] belief that [his] statement contains a
billing error” within 60 days after the creditor transmitted that
statement, the creditor must comply with “two separate
obligations.” Id. at 234, 236 (citing 15 U.S.C. § 1666(a)).
First, within 30 days of receiving that written notice, it must
acknowledge receipt to the consumer in writing. 15 U.S.C.
§ 1666(a)(3)(A). Second, within two billing cycles and “in
no event later than ninety days” after the consumer files his
written dispute, it must either (1) “make appropriate
corrections” to the consumer’s account, “including the
crediting of any finance charges on amounts erroneously
billed,” or (2) “conduct[] an investigation” into the dispute
and “send a written explanation” to the consumer “setting
forth to the extent applicable the reasons why the creditor
believes the account . . . was correctly shown in the
statement.” Id. § 1666(a)(3)(B)(i)–(ii). The creditor must
take these steps “before making any attempt to collect the
disputed amount.” Am. Express, 452 U.S. at 237.
2. TILA’s Unauthorized-Use Provision
While the FCBA applies to all creditors, including
credit card issuers, Congress elsewhere amended TILA to
include another layer of protection specifically for consumers
who use credit cards. Act of Oct. 26, 1970, Pub. L. No. 91-
508, 84 Stat. 1114, 1126–27. Responding in part to the then-
“relatively recent development” of unsolicited credit cards, S.
Rep. No. 91-739, at 2 (1970), Congress also took aim with
these amendments at an issue “associated not only with
unsolicited credit cards but with all credit cards—the problem
of liability in the event the card is lost or stolen,” id. at 5.
6
Because, even after TILA was enacted, “[m]ost credit card
agreements” held a consumer liable for any losses incurred by
the unauthorized use of a credit card before the consumer had
notified the issuer that the card had been lost or stolen,
Congress recognized that a consumer’s failure to
“immediately discover and report” a loss or theft could result
in his being held liable for “thousands of dollars in
unauthorized purchases made by a fast working thief.” Id.
What’s more, there was “little incentive” for card issuers to
“take precautionary action” because any such liability could
“always be passed on to the cardholder.” Id.
To fix this problem, Congress enacted 15 U.S.C.
§ 1643, entitled “Liability of holder of credit card,” to
“safeguard the consumer . . . by limiting the liability of
consumers for the unauthorized use of credit cards.” S. Rep.
No. 91-739, at 1. The statute accomplishes this goal by
“plac[ing] the risk of fraud primarily on the card issuer,” and
requiring the issuer to “demonstrate that it has taken certain
measures to protect the cardholder from fraud before it can
hold a cardholder liable for any unauthorized charges.” DBI
Architects, P.C. v. Am. Express Travel-Related Servs. Co.,
388 F.3d 886, 892 (D.C. Cir. 2004). Under § 1643, an issuer
may hold a cardholder liable for the unauthorized use of a
card “only if” certain conditions are met. 15 U.S.C.
§ 1643(a)(1).
Three of those conditions feature here. First, for
liability to be imposed by the issuer, it must have given the
cardholder “adequate” notice both of his potential liability
and of how to notify the issuer in the event of the loss or theft
of the card before the unauthorized use. Id. § 1643(a)(1)(C)–
(D). Second, the issuer may only impose liability for
7
unauthorized use that “occurs before the . . . issuer has been
notified that an unauthorized use of the credit card has
occurred or may occur.” Id. § 1643(a)(1)(E). Finally, any
liability imposed may not be “in excess of $50.” Id.
§ 1643(a)(1)(B). The requirement that an issuer meet these
conditions before imposing liability is a strict one: “Except as
provided in [§ 1643], a cardholder incurs no liability from the
unauthorized use of a credit card.” Id. § 1643(d).
With TILA’s framework in mind, we now turn to the
facts of this case.
B. Factual Background
As this is an appeal from a grant of a motion to
dismiss, the factual allegations are taken from the operative
amended complaint and are accepted as true. Trzaska v.
L’Oreal USA, Inc., 865 F.3d 155, 162 (3d Cir. 2017). In June
2015, soon after William Krieger noticed his home computer
had stopped working, he received a phone call from an
individual identifying himself as a Microsoft employee and
telling Krieger his computer had a virus and the caller needed
to access the computer remotely to fix it. Krieger acquiesced,
but, while the caller was accessing the computer, Krieger’s
daughter arrived home and, upon learning what was
happening, suggested the call was “probably a scam” and
disconnected the computer. App. 27. As she did so, Krieger
saw his Bank of America credit card number flash across the
screen.
Alarmed, Krieger called Microsoft, only to learn that
the original caller was not a Microsoft employee. Krieger
8
then called BANA to check whether the incident had resulted
in any unauthorized charges on his credit card. The call
confirmed his fears: a $657 Western Union money transfer
had just been purchased on his card. Although Krieger
protested to BANA’s representative that the money transfer
was unauthorized and that his account was “compromised,”
he was told that, until he received his next monthly billing
statement, “nothing could be done.” App. 28.
Sure enough, when Krieger received his next BANA
statement, around July 29, it included the $657 Western
Union charge. Consistent with the instructions he was given
earlier, he called BANA again. During that July 29 call,
however, Krieger was again told BANA “could do nothing,”
this time because Western Union had “already authorized the
payment.” App. 29. Now “no longer happy” with BANA,
Krieger told the representative he wished to cancel his
account entirely. App. 29. That, apparently, caused BANA
to reconsider.
Mere hours later, BANA called Krieger back with a
change in plans: BANA offered to “credit [his] account while
it conducted an investigation on the unauthorized use.”
App. 29. And within a few days, it sent Krieger a letter
confirming, pursuant to that call, that it had “issued [a]
credit[] to [his] account for the disputed charge[]” that
“w[ould] appear on [his] monthly statement,” and that, while
Western Union would “have the opportunity to review the
information and provide additional documentation to support
why they feel the transaction[] is valid,” BANA “consider[ed]
[the] dispute[] resolved.” App. 46. On Krieger’s next
statement, in mid-August, a “-$657” credit was posted to his
9
account, App. 49, and Krieger “believed that the matter had
been resolved,” App. 30.
His belief was short-lived. In mid-September, Krieger
opened the mail to find a very different letter. In this one,
BANA advised him that Western Union had “provided a copy
of the sales slip[] as verification of the charge[]” whose
information “matche[d] the home address, phone number, or
email address . . . listed on [his] account.” App. 51. The slip
itself, which was attached to the letter, revealed the charge
had been paid out to one “Amit Rajak,” in “Mumbai,” India,
App. 64, and the letter declared that the charge was “valid”
and therefore “w[ould] be rebilled,” App. 51. In his amended
complaint, Krieger alleged that he “does not know anyone
named Amit Rajak” and “has never been to India.” App. 31.
Nonetheless, the $657 charge appeared on Krieger’s next
statement, which he received a week later (the “September 18
statement”).2
Frustrated by BANA’s about-face, Krieger quickly
sent the company a two-page letter describing, in detail, the
entire sequence of events. In that letter, which BANA
received on September 29, Krieger again emphasized that the
2
Notably, after receiving this statement, Krieger called
Western Union, where, to his surprise, he learned that,
although BANA had told him on July 29 that Western Union
had already authorized the payment, the money transfer had
not been paid out until August 1. In other words, before
Western Union completed the transaction, Krieger had
informed BANA “multiple times that the charge was
unauthorized.” App. 32.
10
charge was unauthorized and requested it be
“remove[d] . . . altogether.” App. 57. BANA denied
Krieger’s request in a letter saying only that, while it had “re-
examined” the charge, the information provided by Western
Union still matched that on Krieger’s account and thus
BANA still considered the charge valid. App. 62. To avoid
late fees and interest, Krieger paid BANA the entire $657
before turning to the courts.
C. Procedural Background
Originally filed in state court and then removed by
BANA to the Middle District of Pennsylvania, Krieger’s
amended complaint included two claims relevant here: one
under the FCBA and one under TILA’s unauthorized-use
provision. As the basis for his FCBA claim, Krieger alleged
that he had timely submitted a written notice of billing error
regarding the $657 charge and BANA had neither credited the
charge nor conducted a reasonable investigation. As the basis
for his unauthorized-use claim, Krieger alleged that BANA
imposed liability for more than $50 by billing him the full
amount when it had reason to believe the charge was
unauthorized. Both claims were brought under TILA’s
private right of action, 15 U.S.C. § 1640, and, for each,
Krieger requested statutory damages, costs, attorneys’ fees,
and “actual damages.” App. 35–36.
The District Court, however, dismissed Krieger’s
complaint with prejudice for failure to state a claim. Krieger
v. Bank of Am., N.A., No. 4:16-CV-00830, 2017 WL 168161,
at *7 (M.D. Pa. Jan. 17, 2017). Starting with the FCBA
claim, it determined that the operative billing statement, i.e.,
the statement that triggered the 60-day period in which
Krieger was required to dispute the charge in writing, was the
11
July 29 statement where the Western Union charge first
appeared. Id. at *4. Working off that premise, the District
Court reasoned that, because the “absolute earliest date” on
which that statement “could have been issued” was “July 28,”
and BANA did not receive Krieger’s written notice until
September 29—63 days later—the notice was untimely,
BANA’s obligations under the FCBA were “never triggered,”
and liability on this claim “c[ould] therefore not be imposed.”
Id. While Krieger had argued the 60-day period should have
been calculated from the September 18 statement where
BANA first reinstated the charge, the District Court dismissed
that as an “inspired argument[] concerning what [Krieger]
believes the law should be,” and contrary to the “plain
language” of TILA’s implementing regulation (known as
“Regulation Z”),3 which requires that written notice be
3
In enacting TILA, Congress “granted the [Federal
Reserve] Board the authority to issue regulations to achieve
TILA’s purposes,” Chase Bank USA, N.A. v. McCoy, 562
U.S. 195, 198 (2011), and, pursuant to this “expansive
authority . . . to elaborate and expand the legal framework
governing commerce in credit,” the Federal Reserve
promulgated Regulation Z, Ford Motor Credit Co. v.
Milhollin, 444 U.S. 555, 559–60 (1980). In 2010’s Dodd–
Frank Wall Street Reform and Consumer Protection Act,
Congress reassigned this regulatory authority to the
Consumer Financial Protection Bureau (CFPB), see 15 U.S.C.
§ 1604(a), and today, Regulation Z is codified within the
CFPB’s regulations at 12 C.F.R. pt. 1026, as are the CFPB’s
own Official Staff Interpretations of TILA and Regulation Z,
see 12 C.F.R. pt. 1026, supp. I, pt. 1 (Official Interpretations).
Because the agency’s guidance is “published in accordance
with the broad powers that Congress delegated to the [CFPB]
12
transmitted within 60 days after the “first periodic statement
that reflects the alleged billing error.” Id. at *5 (quoting 12
C.F.R. § 226.13(b)).4 Because, in the District Court’s view,
the first such statement was the July 29 statement, Krieger’s
written notice was untimely and he failed to state a claim
under the FCBA. Id.
Moving to the unauthorized-use claim, the District
Court initially acknowledged that 15 U.S.C. § 1643 does
“place[] limits on the liability of a cardholder for
unauthorized use of a credit card,” with the “[m]ost
pertinent[]” being that such liability may not be “in excess of
$50.” Id. Nevertheless, construing Krieger’s § 1643 claim as
seeking “reimbursement” only, the District Court rejected it,
drawing on our case law for the proposition that § 1643 “does
not provide a cardholder with a right to reimbursement nor a
private cause of action.” Id. (citing Azur v. Chase Bank, USA,
Nat’l Ass’n, 601 F.3d 212, 217 (3d Cir. 2010); Sovereign
Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162, 175 (3d Cir.
2008)). Rather, the District Court held that § 1643 functions
to fill gaps in the statute,” we “defer [to it] quite broadly,”
Roberts v. Fleet Bank (R.I.), 342 F.3d 260, 265 (3d Cir.
2003), as amended (Oct. 21, 2003), that is, as long as the
agency’s views are not “demonstrably irrational,” we treat
them as “dispositive,” Ford Motor Credit, 444 U.S. at 565.
4
While the relevant section of Regulation Z as
promulgated by the CFPB is located at 12 C.F.R. § 1026.13, a
materially identical regulation, to which the District Court
and BANA cite, also appears at 12 C.F.R. § 226.13 within the
Federal Reserve’s regulations. We will cite to the current
version of the regulation at § 1026.13.
13
solely as a “limit[] [on] a card issuer’s potential recovery for
fraudulent purchases.” Id. Believing Krieger thus was trying
to use it “as a sword bent on forcing liability through a novel
cause of action” in just the way we had “invalidated” in
Sovereign Bank and Azur, the District Court concluded he
also failed to state an unauthorized-use claim under TILA.
Id. at *5–7. Krieger timely appealed.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction under 28 U.S.C.
§ 1331. We have jurisdiction under 28 U.S.C. § 1291. We
review de novo a District Court’s dismissal under Federal
Rule of Civil Procedure 12(b)(6) for failure to state a claim.
Schmidt v. Skolas, 770 F.3d 241, 248 (3d Cir. 2014). Like the
District Court, we “must accept all facts alleged in the
complaint as true and construe the complaint in the light most
favorable to the nonmoving party,” Flora v. County of
Luzerne, 776 F.3d 169, 175 (3d Cir. 2015), and determine
whether the complaint pleads “enough facts to state a claim to
relief that is plausible on its face,” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007).
III. Discussion
Applying that standard of review, we will reverse the
judgment of the District Court because we conclude Krieger
has stated claims for relief under both the FCBA and TILA’s
unauthorized-use provision.
14
A. Fair Credit Billing Act Claim
To trigger a creditor’s obligation either to credit a
disputed charge or to conduct a reasonable investigation into
the matter, a consumer must submit a written notice of billing
error within 60 days after receiving the statement that
contains the error. 15 U.S.C. § 1666(a). Here, the District
Court rejected Krieger’s claim based on its view that the 60-
day period began on July 29, the first time the $657 Western
Union charge ever appeared on his billing statement, making
the written notice he submitted on September 29, 62 days
later, untimely. Krieger, 2017 WL 168161, at *4. On appeal,
Krieger argues this was improper and, because BANA
removed the charge from his statement and only reinstated it
on September 18, that was the date the 60-day period ran
from, making his notice timely. We agree with Krieger:
where, as here, a creditor removes a disputed charge from a
billing statement and later reinstates that charge, the 60-day
period in which a consumer must file a written dispute begins
when the consumer receives the first statement reinstating the
charge.
In the discussion that follows, we explain, first, why
our holding finds support in the FCBA’s text, relevant
guidance from the CFPB, and the consumer-protection
policies undergirding both TILA and the FCBA, and, second,
why the District Court misapplied Regulation Z in reaching
the opposite result and dismissing Krieger’s FCBA claim.
15
1. Selecting the Operative Statement in Light
of the FCBA’s Text, the CFPB’s Guidance,
and Underlying Policy Concerns
“[W]e start, of course, with the statutory text[.]”
Sebelius v. Cloer, 569 U.S. 369, 376 (2013). The FCBA
requires that a consumer dispute a billing error only where he
“belie[ves] that [his] statement contains a billing error.” 15
U.S.C. § 1666(a)(2). In other words, where the statement
does not contain any errors, the FCBA does not impose any
obligation on the consumer at all. And that makes perfect
sense. The consumer’s goal in filing a written notice of
billing error is to require the creditor either to correct the error
or to conduct a reasonable investigation of the claim. Id.
§ 1666(a)(3)(B). Where there is no error, notice would be
nonsensical, as was the case here. When Krieger received his
August billing statement—which not only did not list the
Western Union charge, but, indeed, credited the charge to his
account—there was no longer anything to dispute because
Krieger had no reason to “belie[ve] that [his] statement
contain[ed] a billing error.” To put a fine point on it, had
BANA not reinstated the charge, there would have been no
basis for Krieger to bring an FCBA claim nor any practical
reason to do so. Only when BANA decided to reinstate the
charge did the FCBA once again become relevant, and, for
that reason, only then did the 60-day period begin to run.
This conclusion also comports with CFPB guidance.
The agency has specified that, where there is a billing error
but the creditor initially fails to send a billing statement, the
60-day period will begin to “run[] from the time the statement
should have been sent,” but “[o]nce the statement is
provided,” the consumer will have “another 60 days to assert
any billing errors reflected on it.” Official Interpretations,
16
para. 13(b)(1), § 1. In other words, even where there is an
existing error that the consumer would have reason to dispute
so that the 60-day period has started to run, the clock is reset
once the charge actually appears on a statement. If the 60-
day period restarts in that circumstance, it would be
incongruous to hold it does not where, as here, a creditor has
affirmatively removed a disputed charge (so that the
consumer no longer has any reason to file a dispute) and only
reinstates it on a later statement. Moreover, we perceive no
reason to think allowing such an extension would prejudice
unwary creditors. After all, if a subsequent statement restarts
the clock even where a creditor fails to communicate the
charge by mistake, surely the same result obtains where a
creditor fails to communicate the charge by design.
Finally, we consider the remedial policies underlying
TILA and the FCBA. Congress enacted TILA to “require[]
full disclosure of credit charges . . . so that the consumer can
decide for himself whether the charge is reasonable,” S. Rep.
No. 90-392, at 1, and, together with the FCBA, to “protect the
consumer against . . . unfair credit billing and credit card
practices,” 15 U.S.C. § 1601(a). We, in turn, have
emphasized that, because TILA is “designed to provide
easily-understood information to ordinary consumers,” courts
should evaluate information creditors convey to consumers
“from the point of view of the consumer.” Rossman, 280
F.3d at 394. Thus, we consider the circumstances from
Krieger’s perspective and ask what a “reasonable consumer
. . . would . . . be entitled to assume.” Id.
So viewed, the approach we adopt today is clearly
correct. The same day Krieger first contacted BANA about
the charge, he was told it would be removed while the
17
company conducted an investigation. Shortly thereafter, he
received a letter stating that, while Western Union retained
“the opportunity to review the information and provide
additional documentation to support why they feel the
transaction[] is valid,” for the time being BANA
“consider[ed] [the] dispute[] resolved,” App. 46, and on his
next billing statement the charge was gone. The “only logical
conclusion” a reasonable consumer could reach at that point
was that there was “no longer a billing error,” Appellant’s
Br. 21, and that, as Krieger himself believed, “the matter had
been resolved in his favor,” App. 30.
To hold otherwise would saddle the consumer with an
ongoing duty to file a written dispute concerning a seemingly
“resolved” dispute or risk forfeiting all rights under the
FCBA, and, at the same time, would offer creditors a path to
avoid their FCBA obligations altogether by automatically
removing a charge in response to a concerned consumer’s
call—surely a common first response when a curious charge
appears on a credit card bill—and then waiting for 60 days to
pass before reinstating it. We decline to take a path so
antithetical to TILA’s purpose of eradicating “unfair[ness]”
and “confusi[on]” in the credit markets. 15 U.S.C. § 1601(a);
Ramadan, 156 F.3d at 502. As we have explained,
“[a]llowing lenders to violate” their statutory obligations “but
avoid liability if they successfully concealed the violation
from the debtor . . . would undermine the core remedial
purpose of TILA.” Ramadan, 156 F.3d at 502.
For the foregoing reasons, we conclude that, where a
creditor removes a charge from a consumer’s statement only
later to reinstate it, the consumer has 60 days after receiving
the first statement on which the reinstated charge appears to
18
provide written notice of the billing error. Here, because the
first statement on which the disputed $657 Western Union
charge appeared after BANA reinstated it was the September
18 statement, and BANA received Krieger’s written notice
just 11 days later, on September 29, his notice was timely.
2. The District Court’s Reliance on an
Inapplicable Regulation
In concluding that the 60-day period ran from the July
29 statement5 and dismissing Krieger’s claim for failure to
state a claim, the District Court held it was “compelled” by
language in Regulation Z to look only to the “first periodic
statement that reflects the alleged billing error.” Krieger,
2017 WL 168161, at *5 (emphasis added by the District
Court) (quoting 12 C.F.R. § 226.13(b)(1)). And in defending
that reading on appeal, BANA contends that its “later
decision to rebill the Western Union Charge . . . does not
5
In fact the District Court determined the 60-day
period began on July 28, believing that was “the absolute
earliest date on which [the] first statement containing the
Western Union charge could have been issued.” Krieger,
2017 WL 168161, at *4. Though immaterial given our
holding here, this too was error. The FCBA provides that the
60-day period begins running only when a creditor has
“transmitted to an obligor” a statement containing a billing
error, 15 U.S.C. § 1666(a), and, “in ordinary meaning and
usage, transmission of the mail is not complete until it arrives
at the destination,” Dolan v. U.S. Postal Serv., 546 U.S. 481,
486 (2006). Thus, even under the District Court’s approach
to this case, the 60-day period should have begun on July 29,
when Krieger alleges he received that statement.
19
restart the FCBA written notice clock” and that Krieger’s
contrary arguments rely only on “policy” and ignore
§ 1026.13(b)(1)’s “plain language.” Appellee’s Br. 20, 22.
While the language of § 1026.13(b)(1) may be plain as
applied to a billing error reflected on regularly recurring
statements, it has little bearing on the circumstances of this
case. Section 1026.13(b)(1) provides that the consumer must
provide written notice “no later than 60 days after the creditor
transmitted the first periodic statement that reflects the
alleged billing error.” 12 C.F.R. § 1026.13(b)(1). Put
another way, where the consumer initially does not pay a
disputed charge so that the charge is carried forward
continuously in successive periods, § 1026.13(b)(1) tells us
the 60-day period does not restart upon the consumer’s
receipt of each new “periodic statement that reflects the
alleged billing error,” but rather runs from the receipt of the
first of those statements. And wisely so. Indeed, a contrary
rule, where the 60-day period restarted every month just
because the charge went unpaid, would effectively read the
60-day requirement out of the statute. But reading this
regulation to pertain in the circumstances presented here—
where an issuer makes an alleged billing error on one
statement, then eliminates that error on subsequent statements
by crediting and not rebilling the charge, and then introduces
the error into a new series of statements at a later date—
would be in tension with § 1026.13(b)’s text and contrary to
both common sense and broader policy concerns.6
6
To the extent creditors commonly engage in this
practice—at oral argument BANA indicated it does so
“often,” Tr. of Oral Arg. 28:9–20—to resolve billing-error
disputes without need to resort to the specific processes set
20
We start with the regulation’s text. BANA argues that
“periodic” simply refers to billing intervals so, for example,
where statements are issued monthly, the 60 days would run
from the first monthly statement on which the alleged error
ever appeared, regardless whether there was one or more
intervening statements on which the error did not appear. But
§ 1026.13(b) does not run the 60-day clock from the first time
an alleged error appears on “any periodic statement” or even
from the first “statement that reflects the alleged billing
error”; rather, it runs the clock from the first “periodic
statement that reflects the alleged billing error.” Because
“periodic” means “regularly recurring,” NLRB v. Food Fair
Stores, Inc., 307 F.2d 3, 11 (3d Cir. 1962), it is at least an
equally plausible reading of the regulation that it envisions a
series of statements that, on a regularly recurring basis,
“reflect[] the alleged billing error” and then runs the 60 days
from the first of that series. That is to say, where an alleged
billing error appears on one or more statements, then ceases
to appear because it has been reversed by the issuer, there is
no longer any regularly recurring set of statements “that
reflect[] the alleged billing error”; only if and when the error
is reintroduced and begins to appear on a new series of
statements is there a set of statements that are both “regularly
recurring” and “that reflect[] the alleged billing error.”
And as it turns out, that reading is also the only one
that comports with common sense and the consumer-
out in the FCBA or litigation, we have no quibble, as
“[p]arties do generally benefit from the efficient resolution of
disputes,” Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 267
(3d Cir. 2003).
21
protection policies that undergird TILA and the FCBA.7 See
Abramski v. United States, 134 S. Ct. 2259, 2267 (2014)
(statutory construction requires courts to “interpret the
relevant words not in a vacuum, but with reference to the
statutory context, structure, history, and purpose[,] . . . not to
mention common sense”). The FCBA only requires a
consumer to give notice to the issuer where the consumer has
some reason to “belie[ve] . . . [his] statement contains a
billing error.” 15 U.S.C. § 1666(a)(2). Where an alleged
billing error has been removed from the consumer’s statement
and has not been reintroduced, however, not only would there
be no reason for a consumer to provide written notice, but the
consumer also would be hard pressed to show any injury
sufficient to support Article III standing. See Spokeo, Inc. v.
Robins, 136 S. Ct. 1540, 1549–50 (2016) (emphasizing that
“standing requires a concrete injury even in the context of a
statutory violation” and that a plaintiff “cannot satisfy the
demands of Article III by alleging a bare procedural
violation”).
Obligating the consumer to dispute a billing error that,
from a reasonable consumer’s perspective, has been corrected
also would undermine Congress’s twin goals of guaranteeing
“meaningful disclosure of credit terms” to help consumers
“avoid the uninformed use of credit” and “protect[ing] . . .
consumer[s] against . . . unfair credit billing and credit card
7
Though not necessary for our disposition today, we
note that, under our Circuit’s precedent, “remedial legislation
should be construed broadly to effectuate its purpose.” Long
v. Tommy Hilfiger U.S.A., Inc., 671 F.3d 371, 375 (3d Cir.
2012).
22
practices.” 15 U.S.C. § 1601(a). And it would be
inconsistent with the rule that where a creditor has conveyed
to a consumer information in a way that is not “clear and
conspicuous” but is instead “ambiguous,” we require that
those “ambiguities . . . be resolved in favor of the consumer.”8
Rossman, 280 F.3d at 394.
In sum, Krieger’s notice was timely and it was error
for the District Court to dismiss his FCBA claim on the basis
that it was not.9
8
Humphrey v. U.S. Bank, N.A., No. 11-CV-272, 2012
WL 3686272 (N.D. Okla. Aug. 24, 2012), on which BANA
relies, is not to the contrary. Although that case likewise
arose in the context of a creditor removing and then
reinstating a disputed charge, the plaintiff there raised a
different claim, i.e., that the creditor violated the FCBA by
“failing to perform a reasonable investigation of the [new]
dispute that was substantially different from [that for] the
[original] dispute,” and the district court determined the
creditor’s original investigation “was reasonable” so that it
“ha[d] no further responsibilities” when the consumer
“reassert[ed] substantially the same billing error.” Id. at *2,
*5 (quoting 12 C.F.R. § 226.13(h)). Humphrey has no
bearing where, as here, a consumer claims the creditor never
performed a reasonable investigation at any point in the
process.
9
As the District Court did not yet have the opportunity
to reach the issue, we will not address BANA’s alternative
argument that Krieger failed to state a claim because his
allegations reflect that BANA conducted a reasonable
investigation of the Western Union charge and thus complied
with its obligations under the FCBA. Given our holding, we
23
B. Unauthorized-Use Claim
We now turn to Krieger’s claim under 15 U.S.C.
§ 1643, which provides that a credit card issuer may not hold
a cardholder liable for the unauthorized use of a credit card
without complying with specific requirements—among them
that in no circumstances may liability exceed $50. The
amended complaint asserted that BANA violated § 1643 by
rebilling Krieger, and hence imposing liability, for the full
$657 Western Union charge knowing it was potentially
unauthorized, and that this violation caused him “actual
damages.” App. 36. The District Court dismissed the claim,
accepting BANA’s arguments that § 1643 does not give a
cardholder any private right of action at all and that, even if it
does, Krieger was seeking reimbursement for the $657 charge
which is not a type of relief the statute authorizes. Krieger,
2017 WL 168161, at *5. Those arguments, however,
misconstrue the nature of Krieger’s claim and misread our
case law interpreting § 1643.
TILA’s private right of action provides that “any
creditor who fails to comply with any requirement imposed
under [15 U.S.C. §§ 1631–1651] . . . with respect to any
person is liable to such person” for relief that includes “any
actual damage sustained by such person as a result of the
failure.” 15 U.S.C. § 1640(a). That includes “any
requirement” of § 1643, and as “requirement” simply means
“a requisite or essential condition,” Requirement, Webster’s
Third New International Dictionary 1929 (1961) (def. b),
also have no occasion to address Krieger’s alternative
argument that the 60-day period should be subject to
equitable tolling.
24
§ 1640 thus provides a private right of action against an issuer
that fails to comply with the conditions of § 1643 before
holding the cardholder liable for the unauthorized use of a
credit card.
The requisite conditions are: (1) disclosing to the
cardholder previously the “maximum potential liability,” 12
C.F.R. § 1026.12(b)(2)(ii), and a means by which the
cardholder may notify the issuer in the event the card is lost
or stolen, 15 U.S.C. § 1643(a)(1)(C)–(D); (2) conducting a
reasonable investigation of the cardholder’s claim of
unauthorized use, Official Interpretations, para. 12(b), § 3;
(3) not imposing liability that arose after it was notified that
the unauthorized use would or could occur, 15 U.S.C.
§ 1643(a)(1)(E); and (4) limiting any liability it seeks to
impose to $50, id. § 1643(a)(1)(B). If the issuer does not
meet these conditions, then the cardholder “incurs no liability
from the unauthorized use of a credit card,” id. § 1643(d), and
if the issuer nonetheless seeks to impose liability on the
cardholder without satisfying these conditions, it has “fail[ed]
to comply with [a] requirement imposed under [§ 1643],”
giving rise to an action under § 1640.
Here, Krieger chose to anchor his claim in the last
condition, the $50 liability limit, because BANA rebilled him
for the $657 charge after receiving notice it was unauthorized.
Expressly referencing “15 U.S.C. § 1640,” the amended
complaint demanded judgment in Krieger’s favor and relief
that included “actual damages.” App. 36. In other words,
Krieger alleged that BANA caused him actual damages by
violating a requirement of § 1643, and he invoked § 1640,
which authorizes him to sue on that claim. Krieger therefore
did state an unauthorized-use claim, and in dismissing that
25
claim on the ground that § 1643 itself does not provide
consumers with a private right of action, the District Court
failed to recognize that § 1640 does.
The District Court also erred in rejecting Krieger’s
claim as an attempt to seek “reimbursement” under § 1643.
Citing Sovereign Bank and Azur, the District Court held that
§ 1643 “does not provide a cardholder with a right to
reimbursement,” but only “limit[s] a card issuer’s potential
recovery for fraudulent purchases.” Krieger, 2017 WL
168161, at *5. BANA likewise argues on the basis of those
cases that § 1643 “does not impose any requirement on card
issuers.” Appellee’s Br. 29. Indeed, when asked at oral
argument how Krieger, having paid the $657 charge, could
now limit his liability under § 1643 to $50, BANA answered
simply: “He can’t[.]” Tr. of Oral Arg. 44:3–9.
But those conclusions do not follow from our
precedents. In Sovereign Bank, after consumers’ credit card
information was stolen from a retailer, a card issuer sued the
retailer for equitable indemnification based on the theory that
§ 1643 would require the issuer to reimburse any losses
suffered by its cardholders in excess of $50. 533 F.3d at 166,
174. We held that, because Ҥ 1643 does not address, nor is it
even concerned with, the liability of an Issuer or any party
other than the cardholder for unauthorized charges on a credit
card,” the issuer did not have an affirmative “obligat[ion]
. . . to reimburse its cardholders’ accounts” and therefore
could not “forge an equitable indemnification claim from the
provisions of the TILA.” Id. at 175.
In Azur, when the plaintiff discovered that his personal
assistant, to whom he had entrusted his financial affairs, had
26
fraudulently withdrawn over $1 million from his credit card
over a seven-year period and had paid off the card with funds
from the plaintiff’s own bank account, the plaintiff brought
suit against the issuer under § 1643, claiming
“reimbursement” of the misappropriated funds. 601 F.3d at
214–15, 215 n.7, 217. We dismissed this claim, concluding
that the plaintiff’s personal assistant had apparent authority to
use his credit card so that the charges were not
“unauthorized” within the meaning of § 1643, and that, in any
event, as we held in Sovereign Bank, Ҥ 1643 . . . does not
provide the cardholder with a right to reimbursement.” Id. at
217–18, 222.
Neither of those cases addressed an issuer’s violation
of § 1643 by imposing over $50 in liability on a cardholder
even after it was notified that the charges had been
unauthorized. Nor did they mention, much less address, a
cardholder’s right under § 1640 to recover “actual damages.”
The distinction between “reimbursement” and “actual
damages” is significant. Unlike “reimbursement,” which
means “[r]epayment,” Reimbursement, Black’s Law
Dictionary (10th ed. 2014), “actual damages,” as we have
interpreted the term in this very context, is tethered to total
“actual losses,” and, therefore, is “[a]n amount awarded to a
complainant to compensate for a proven injury or loss,”
Vallies II, 591 F.3d at 157 (citation omitted). “Actual
damages” under TILA thus serve to “compensate
. . . consumers” to the full extent they have “suffered actual
harm.” Id. at 158. That is the relief Krieger seeks here: not
merely reimbursement of the $657 charge he paid under
protest but the full “amount . . . to compensate” him for the
“actual harm” he may be able to “prove[]” as a result of
27
BANA’s violation of § 1643. Vallies II, 591 F.3d at 157–58.
Sovereign Bank and Azur do not stand in the way of that
claim.
As a last line of defense, BANA argues that we should
affirm on the alternative ground that merely demanding
payment on a billing statement does not violate § 1643
because it does not impose “liability” on a cardholder.
Instead, according to BANA, § 1643 only applies where an
issuer “impose[s] . . . liability” for unauthorized use “through
the litigation process”—that is, by “su[ing] a cardholder.” Tr.
of Oral Arg. 41:18–19. By this logic, if the cardholder is
sufficiently sophisticated to know his liability will be capped
at $50 and the late fees and interest he incurs will be removed
from his bill if he withholds payment, he will refuse to pay
and force the issuer to sue him for no more than $50; but if
the cardholder is not so savvy and pays his monthly bill—or
has signed up for automatic payments—he is simply out of
luck.
Not so. BANA’s constricted reading of “liability” is
contrary to § 1643’s text, structure, and purpose. As for the
text, § 1643 is entitled “Liability of holder of credit card,” and
mandates that in no circumstances will a cardholder incur
“liability” for unauthorized use “in excess of $50,” or for any
use “[e]xcept as provided in this section.” 15 U.S.C.
§ 1643(a)(1)(B), (d). “Liability,” in turn, means “[t]he
quality, state, or condition of being legally obligated or
accountable.” Liability, Black’s Law Dictionary (10th ed.
2014); see Azur, 601 F.3d at 217 (“‘Liable’ means . . . ‘legally
obligated.’”). And as we have explained, a consumer’s “legal
obligations attach” when he “consummat[es] . . . the . . .
credit agreement,” Rossman, 280 F.3d at 389, and continue to
28
bind him as long as he is “legally required to perform [them]
under the terms of the [contract],” In re Montgomery Ward
Holding Corp., 268 F.3d 205, 209 (3d Cir. 2001). A
cardholder is thus legally obligated to pay the charges that
appear on his bill, and the notion that he does not unless and
until the issuer brings an action against him in court10 no
doubt would come as a surprise to Congress, which enacted
§ 1643 in part to address the “problem of liability” where an
issuer did not sue over a disputed charge but only “insisted on
being paid.”11 S. Rep. No. 91-739, at 5.
What’s more, many of the requirements with which the
issuer must comply before it may impose “liability” under the
statute would make no sense if “liability” were viewed as not
being “impose[d]” until the issuer obtained a judgment in
court.12 For example, issuers, before imposing liability, must
10
Of course, as the statute itself recognizes, one way
an issuer may “enforce liability” is by bringing such an
“action.” 15 U.S.C. § 1643(b).
11
The Senate Report on § 1643 “illustrate[d]” this
problem by describing a case where a family lost their credit
card and notified their bank, only to learn that a “thief had
made purchases of over $1,500”—and, even though the card
had a credit limit of only $400, the “bank insisted on being
paid for the full $1,500.” S. Rep. No. 91-739, at 5.
12
BANA’s reliance for this point on our language in
Azur that § 1643 “limits a card issuer’s ability to sue a
cardholder” and “does not . . . enlarge a card issuer’s
liability,” 601 F.3d at 217, is misplaced. In Azur and
Sovereign Bank, on which Azur relied, we held only that
§ 1643 was concerned with “the liability [of] . . . the
29
have a “means to identify the cardholder on the account,” 12
C.F.R. § 1026.12(b)(2)(iii), must “adequate[ly]” disclose to
the cardholder the “maximum” potential liability, id.
§ 1026.12(b)(2)(ii), and must “conduct a reasonable
investigation of the claim” of unauthorized use, Official
Interpretations, para. 12(b), § 3. Where an issuer does
“not . . . impose liability,” it is expressly excused from those
obligations. See Official Interpretations, paras. 12(b),
§ 2, 12(b)(2), § 1 (providing that, in such a case, the issuer
“need not conduct any investigation of the cardholder’s
claim” or “comply with the disclosure and identification
requirements discussed in § 1026.12(b)(2)”).
Adopting BANA’s reading of “liability” would mean
that issuers could pressure cardholders by continuing to bill
them for unauthorized charges plus penalties and interest
without meeting these conditions, and that Congress provided
no claim for relief under TILA unless and until the cardholder
was haled into court to litigate contested charges. That result,
however, would thwart TILA’s purpose of giving consumers
“meaningful guidance” early in the process, Anderson Bros.
Ford v. Valencia, 452 U.S. 205, 222–23 (1981), and
“enabling [them] to shop around for the best cards,” Rossman,
280 F.3d at 390.
cardholder,” not of the issuer. Sovereign Bank, 533 F.3d at
175; see Azur, 601 F.3d at 217. We did not have occasion to
and did not address the question whether a cardholder “incurs
. . . liability,” 15 U.S.C. § 1643(d), from the inclusion of a
charge on a statement even after it has been disputed. For the
reasons explained here, such contractual liability constitutes
“liability” under that section.
30
In addition, that result would contravene the purpose
of § 1643: consumer protection. This goal is decidedly not
served by forcing every cardholder billed for an unauthorized
charge to pick between twin evils: (1) refusing to pay, and
risking late fees, interest, and rate increases, see 15 U.S.C.
§ 1637(b)(11)(B)(ii), (b)(12); or (2) paying, and forfeiting his
right to limited liability altogether. And BANA’s proposed
interpretation would not only deprive a consumer of any
remedy unless he was willing to risk the consequences of
refusing to pay, but also would arbitrarily and irrationally
penalize unsophisticated consumers who do not realize a
charge was unauthorized until after they have paid their bill,
as well as those who use automatic payment plans, see 12
C.F.R. § 1026.13(d) (recognizing these plans). Yet as a
consumer protection statute, § 1643 is not intended for the
most sophisticated consumer. To the contrary, we interpret it
from the perspective of a “reasonable consumer,” Rossman,
280 F.3d at 394, i.e., one who is not “particularly
sophisticated.” Palmer v. Champion Mortg., 465 F.3d 24, 28
(1st Cir. 2006). Because it is irrational to believe Congress
intended to treat consumers who responsibly pay their bills
more harshly than those who do not, we “decline to base an
interpretation of the statute on” such a “happenstance.”
United States ex rel. Stinson, Lyons, Gerlin & Bustamante,
P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1159 (3d Cir.
1991).
We conclude that a cardholder incurs “liability” for an
allegedly unauthorized charge when an issuer, having reason
to know the charge may be unauthorized, bills or rebills the
cardholder for that charge. When an issuer does so, it must
comply with the requirements of § 1643, and when a
cardholder alleges those requirements were violated, those
31
allegations may state a claim under § 1640. Krieger has
stated such a claim, and we will reverse the District Court’s
decision to the contrary.
IV. Conclusion
For the foregoing reasons, we will reverse and remand
for proceedings consistent with this opinion.
32