"Fixed" Doesn't Mean "Fixed Forever"

by Mary Beth Guard

When dealing with customers and prospective customers, it's always wise to be clear about the terms under which your products and services will be offered. It's no guarantee against getting sued, but it's refreshing to hear that in at least one recent case it was enough to protect a bank against liability.

Roberts v. Fleet Bank was filed in the U.S. District Court for the Eastern District of Pennsylvania as a >
The bank's lawyers argued that the term "fixed" was merely used to refer to an interest rate that was not variable and the disclosures clearly indicated the terms of the credit card, including the rate, could be changed "at any time."

In support of her case, the plaintiff noted that Fleet's solicitation letter contained what was, in effect, a promise that the 7.99 percent rate "is NOT an introductory rate. It won't go up in just a few short months." Fleet's attorneys, on the other hand, argued that the actual TILA disclosures were accurate and clearly stated that the rate could change at any time, and that the plaintiffs' case was without merit because it was premised on the solicitation letter -- which has nothing to do with the actual TILA disclosures.

That was enough for the judge. In an extremely brief decision, he dismissed the claim, saying:

"The preliminary disclosure statement sent to plaintiff at the same time as the solicitation letter informed her that the defendant reserved the right to change the interest rate, upon due notice. The credit card agreement, which plaintiff signed (after her application had been received and approved) also contained an express provision giving the defendant the right to change the interest rate."

Despite the court's decision, we would advocate maintaining consistency between your marketing materials and your formal legal disclosures. This institution dodged a bullet under Truth in Lending. It might not have been so lucky if the claim had been for deceptive trade practices.

Originally appeared in the November 2001 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 4/8/02