California Federal Court Dismisses Credit Card Interest Rate Class Action

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On April 15, the U.S. District Court for the Northern District of California dismissed a putative class action in which the named plaintiff brought a breach of contract claim and other common law and statutory claims after the issuer stopped providing the cardholder an interest free grace period on new charges because the cardholder transferred a balance from another card account as part of an interest free balance transfer offer and did not immediately pay off that transferred balance. Barton v. Capital One Bank (USA), N.A., No. 12-5412, slip op. (N.D. Cal. Apr. 16, 2013). Applying Virginia law, the court held that while some cardholders may have accepted the offer and transferred balances “without realizing that, because it would cause them to begin carrying a post-due balance each month, it would deprive them of the grace period they had previously enjoyed,” the agreement was clear that “carrying a post-due balance — whatever its source — terminated cardmembers’ rights to the 25-day grace period.” For the same reason, the court held the cardholder’s claim that the issuer violated the CARD Act’s requirement that a “creditor shall not change the terms governing the repayment of any outstanding balance” similarly failed. The court also held that the cardholder failed to allege any contractual discretion to support her claim of breach of good faith and dismissed her claim under California’s Unfair Competition Law.