9th Circuit Says On-Line TILA Disclosures for Credit Card Application Provided Safe-Harbor Against False Advertising Claim

In  Davis v. HSBC Bank Nevada, N.A., — F.3d —-, 2012 WL 3804370 (9th Cir. 2012), the Court of Appeals for the Ninth Circuit held that a credit card company’s on-line TILA disclosures identifying that an annual fee would be required provided a safe-harbor against a false advertising claim based on a claim that a retailer’s advertisements failed to disclose that fact.

We conclude that TILA and Regulation Z provide such a safe harbor with respect to Defendants’ disclosures in the online application. TILA requires that applications for an account under an open end consumer credit plan must include certain disclosures. 15 U.S.C. § 1637(c). Where, as here, the application is provided online and contains “specific information” about the terms and conditions, the application must disclose, among other things, “[a]ny annual fee, other periodic fee, or membership fee imposed for the issuance or availability of a credit card, including any account maintenance fee or other charge imposed based on activity or inactivity for the account during the billing cycle.” 15 U.S.C. §§ 1637(c)(1)(A)(ii)(I), (c)(3)(B)(i)(I). The disclosure must appear “clearly and conspicuously” in the tabular format commonly referred to as the Schumer Box. 15 U.S.C. §§ 1632(a), (c)(2). ¶  TILA delegates to the Board of Governors of the Federal Reserve Bank (“Board”) the duty to implement these disclosure requirements and to prescribe regulations governing the “form and manner” of the disclosures. 15 U.S.C. § 1632(c)(1)(A). Accordingly, the Board has promulgated “Regulation Z,” 12 C.F.R. § 226.1 et seq. , which imposes “even more precise” disclosure requirements. Virachack v. Univ. Ford, 410 F.3d 579, 581 (9th Cir.2005). Regulation Z requires lenders to provide specific disclosures “on or with a solicitation or an application to open a credit or charge card account.” 12 C.F.R. §§ 226.5a(a), (b). In pertinent part, the lender must disclose “[a]ny annual or other periodic fee that may be imposed for the issuance or availability of a credit or charge card, including any fee based on account activity or inactivity; how frequently it will be imposed; and the annualized amount of the fee.” 12 C.F.R. § 226.5a(b)(2)(i). Further, the disclosure “shall be in the form of a table with headings, content, and format substantially similar to any of the applicable tables found in G–10 in appendix G to this part.” 12 C.F.R. § 226.5a(a)(2)(i).  ¶  We have no trouble concluding that TILA and Regulation Z create a safe harbor for Defendants’ disclosure in the online application. Both the statute and the regulations clearly permit, and indeed require with equal force, the disclosure of any annual fee in an application for a credit card such as the RZMC. Our comparison of the online application’s disclosure with the sample Schumer table in Appendix G demonstrates that Defendants’ disclosure complied with these federal requirements. Indeed, Davis has not and cannot allege any violation under these provisions. Because the disclosure in the application clearly was permitted by federal law, it cannot serve as the basis for UCL liability.