OPINION OF THE COURT
CHASE BANK USA, N. A. V. MCCOY
562 U. S. ____ (2011)
SUPREME COURT OF THE UNITED STATES
NO. 09-329
CHASE BANK USA, N. A., PETITIONER
v. JAMES
A. McCOY, individually and on behalf of all others similarly
situated
on writ of certiorari to the united states court of
appeals for the ninth circuit
[January 24, 2011]
Justice Sotomayor delivered the
opinion of the Court.
As applicable to this case,
Regulation Z—promulgated by the Board of Governors of the Federal
Reserve System (Board) pursuant to its authority under the Truth in
Lending Act (TILA), 82 Stat. 146, 15 U. S. C. §1601
et
seq.—requires that issuers of credit cards provide cardholders
with an “[i]nitial disclosure statement” specifying,
inter
alia, “each periodic rate” associated with the account. 12 CFR
§226.6(a)(2) (2008). The regulation also imposes “[s]ubsequent
disclosure requirements,” including notice to cardholders
“[w]henever any term required to be disclosed under §226.6 is
changed.” §226.9(c)(1). This case presents the question whether
Regulation Z requires an issuer to notify a cardholder of an
interest-rate increase instituted pursuant to a provision of the
cardholder agreement giving the issuer discretion to increase the
rate, up to a stated maximum, in the event of the cardholder’s
delinquency or default. We conclude that the version of Reg-
ulation Z applicable in this case does not require such notice.
I
A
Congress passed TILA to promote
consumers’ “informed use of credit” by requiring “meaningful
disclosure of credit terms,” 15 U. S. C. §1601(a), and granted
the Board the authority to issue regulations to achieve TILA’s
purposes, §1604(a). Pursuant to this authority, the Board
promulgated Regulation Z, which requires credit card issuers to
disclose certain information to consumers.[
Footnote 1] Two provisions of Regulation Z are at issue
in this case. The first, 12 CFR §226.6, explains what information
credit card issuers are obliged to provide to cardholders in the
“[i]nitial disclosure statement,” including “each periodic rate
that may be used to compute the finance charge.” §226.6(a)(2). The
second, §226.9, imposes upon issuers certain “[s]ubsequent
disclosure requirements,” including a requirement to provide notice
“[w]henever any term required to be disclosed under §226.6 is
changed.” §226.9(c)(1). As a general matter, notice of a change in
terms has to be provided 15 days in advance of the effective date
of the change.
Ibid. When “a periodic rate or other
finance charge is increased because of the consumer’s delinquency
or default,” however, notice only need be given “before the
effective date of the change.”
Ibid. Regulation Z also
explains that no notice is required under §226.9 when the change in
terms “results from … the consumer’s default or delinquency (other
than an increase in the periodic rate or other finance charge).”
§226.9(c)(2).
The official interpretation of
Regulation Z (Official Staff Commentary or Commentary) promulgated
by the Board explains these requirements further: Section
226.9(c)(1)’s notice-of-change requirement does not apply “if the
specific change is set forth initially, such as … an increase that
occurs when the consumer has been under an agreement to maintain a
certain balance in a savings account in order to keep a particular
rate and the account balance falls below the specified minimum.” 12
CFR pt. 226, Supp. I, Comment 9(c)–1, p. 506 (2008)
(hereinafter Comment 9(c)–1). On the other hand, the Commentary
explains, “notice must be given if the contract allows the creditor
to increase the rate at its discretion but does not include
specific terms for an increase (for example, when an increase may
occur under the creditor’s contract reservation right to increase
the periodic rate).”
Ibid. As to the timing requirements,
the Commentary states: “[A] notice of change in terms is required,
but it may be mailed or delivered as late as the effective date of
the change . . . [i]f there is an increased periodic rate or any
other finance charge attributable to the consumer’s delinquency or
default.”
Id., Comment 9(c)(1)–3, at 507 (hereinafter
Comment 9(c)(1)–3).
At least as early as 2004, the Board began
considering revisions to Regulation Z. The new regulations the
Board eventually issued do not apply to the present case, but the
details of their promulgation provides useful background in
considering the parties’ arguments with respect to the version of
Regulation Z we address here. In 2004 the Board issued an advance
notice of proposed rulemaking announcing its intent to consider
revisions. 69 Fed. Reg. 70925 (2004). In so doing, the Board
described how it understood the notice requirements to function at
that time:
“[A]dvance notice is not required in all cases. For
example, if the interest rate or other finance charge increases due
to a consumer’s default or delinquency, notice is required, but
need not be given in advance. 12 CFR 226.9(c)(1); comment
9(c)(1)–3. And no change-in-terms notice is required if the
creditor specifies in advance the circumstances under which an
increase to the finance charge or an annual fee will occur. Comment
9(c)–1. For example, some credit card account agreements permit the
card issuer to increase the interest rate if the consumer pays late
. . . . Under Regulation Z, because the circumstances are specified
in advance in the account agreement, the creditor need not provide
a change-in-terms notice 15 days in advance of the increase; the
new rate will appear on the periodic statement for the cycle in
which the increase occurs.”
Id., at 70931–70932.
The Board asked for public comment on whether these
“existing disclosure rules” were “adequate to enable consumers to
make timely decisions about how to manage their accounts.”
Id., at 70932.
Subsequently, in 2007, the Board published
proposed amendments to Regulation Z and the Commentary. 72 Fed.
Reg. 32948. One amendment would have required 45 days’ advance
written notice when “(i) [a] rate is increased due to the
consumer’s delinquency or default; or (ii) [a] rate is increased as
a penalty for one or more events spec- ified in the account
agreement, such as making a late payment or obtaining an extension
of credit that exceeds the credit limit.”
Id., at 33058
(proposed 12 CFR §226.9(g)). The Board explained that, under the
amendments, “creditors would no longer be permitted to provide for
the immediate application of penalty pricing upon the occurrence of
certain events specified in the contract.” 72 Fed. Reg. 33012.
In January 2009, the Board promulgated a final
rule implementing many of the proposed changes, scheduled to be
effective July 1, 2010. 74 Fed. Reg. 5244. Most saliently, the
Board included a new provision, §226.9(g), which requires 45 days’
advance notice of increases in rates due to cardholder delinquency
or default, or as a penalty, including penalties for “events
specified in the account agreement, such as making a late payment
… .” 12 CFR §226.9(g)(1)(2010). In May 2009, Congress enacted
the Credit Card Accountability Responsibility and Disclosure Act
(Credit CARD Act or Act), 123 Stat. 1734. The Act amended TILA, in
relevant part, to require 45 days’ advance notice of most increases
in credit card annual percentage rates. 15 U. S. C. §1637(i)
(2006 ed., Supp. III). Because the Credit CARD Act’s notice
requirements with respect to interest-rate increases largely mirror
the requirements in the new version of the regu- lation, the Board
changed the effective date of those requirements to August 20,
2009, to coincide with the statutory schedule. See 74 Fed. Reg.
36077–36079. The transactions giving rise to the dispute at issue
in this case, however, arose prior to enactment of the Act and the
promulgation of the new regulatory provisions.
B
Respondent James A. McCoy brought
this action in the Superior Court of Orange County, California on
behalf of himself and others similarly situated against petitioner
Chase Bank USA, N. A.; Chase removed the action to the United
States District Court for the Central District of California under
28 U. S. C. §1441. At the time of the transactions at issue,
McCoy was the holder of a credit card issued by Chase. The
cardholder agreement between the parties (Agreement) provides, in
relevant part, that McCoy is eligible for “Preferred rates,” but
that to keep such rates he has to meet certain conditions,
including making “at least the required minimum payments when due
on [his] Account and on all other loans or accounts with [Chase]
and [his] other creditors.” Brief for Respondent 8, n. 2; see
also 559 F. 3d 963, 972, n. 1 (CA9 2009) (Cudahy, J.,
dissenting). If any of the conditions in the Agreement are not met,
Chase reserves the right to “change [McCoy’s] interest rate and
impose a Non-Preferred rate up to the maximum Non-Preferred rate
described in the Pricing Schedule” and to apply any changes “to
existing as well as new balances … effective with the billing cycle
ending on the review date.” Brief for Respondent 8, n. 2.
McCoy’s complaint alleges that
Chase increased his interest rate due to his delinquency or
default, and applied that increase retroactively. McCoy asserts
that the rate increase violates Regulation Z because, pursuant to
the Agreement, Chase did not notify him of the increase until after
it had taken effect.[
Footnote
2] The District Court dismissed McCoy’s complaint, holding that
because the increase did not constitute a “change in terms” as
contemplated by §226.9(c), Chase was not required to notify him of
the increase before implementing it. See App. to Pet. for Cert.
37a–47a.
A divided panel of the United States Court of
Appeals for the Ninth Circuit reversed in relevant part, holding
that Regulation Z requires issuers to provide notice of an
interest-rate increase prior to its effective date. See 559
F. 3d, at 969. Concluding that the text of Regulation Z is
ambiguous and that the agency commentary accompanying the 2004
request for comments and the 2007 proposed amendments favors
neither party’s interpretation, the court relied primarily on the
Official Staff Commentary; in particular, the court noted that
Comment 9(c)–1 requires no notice of a change in terms if the
“specific change” at issue is set forth in the initial agreement.
See
id., at 965–967. The court found, however, that
because the Agreement vests Chase with discretion to impose any
Non-Preferred rate it chooses (up to the specified maximum) upon
McCoy’s default, the Agreement “provides McCoy with no basis for
predicting in advance what retroactive interest rate Chase will
choose to charge him if he defaults.”
Id., at 967.
Accordingly, the court held that because the Agreement does not
alert McCoy to the “specific change” that will occur if he
defaults, Chase was obliged to give notice of that change prior to
its effective date.
Ibid. Relying primarily on the 2004
notice of proposed rulemaking and the 2007 proposed amendments, the
dissenting judge concluded that Regulation Z does not require
notice of an interest-rate increase in the circumstances of this
case. See
id., at 972–979 (opinion of Cudahy, J.).
After the Ninth Circuit’s ruling, the United
States Court of Appeals for the First Circuit decided the same
question in Chase’s favor. See
Shaner v.
Chase Bank
USA, N. A., 587 F. 3d 488 (2009). The First Circuit
relied in part on an
amicus brief submitted by the Board
at the court’s request, in which the agency advanced the same
interpretation of Regulation Z that it now does before this Court.
Id., at 493. We granted certiorari to resolve this
division in authority.[
Footnote
3] 561 U. S. ___ (2010).
II
In order to decide this case, we
must determine whether an interest-rate increase constitutes a
“change in terms” under Regulation Z, when the change is made
pursuant to a provision in the cardholder agreement allowing the
issuer to increase the rate, up to a stated maximum, in the event
of the cardholder’s delinquency or default. Accordingly, this case
calls upon us to determine the meaning of a regulation promulgated
by the Board under its statutory authority. The parties dispute the
proper interpretation of the regulation itself, as well as whether
we should accord deference to the Board’s interpretation of its
regulation. As explained below, we conclude that the text of the
regulation is ambiguous, and that deference is warranted to the
interpretation of that text advanced by the Board in its
amicus brief.
A
Our analysis begins with the text
of Regulation Z in effect at the time this dispute arose. First,
§226.6 requires an “[i]nitial disclosure statement”:
“The creditor shall disclose to
the consumer, in terminology consistent with that to be used on the
periodic statement, each of the following items, to the extent
applicable:
“(a)
Finance charge. The
circumstances under which a finance charge will be imposed and an
explanation of how it will be determined, as follows:
. . . . .
“(2) A disclosure of each periodic rate that
may be used to compute the finance charge, the range of balances to
which it is applicable, and the corresponding annual percentage
rate. When different periodic rates apply to different types of
transactions, the types of transactions to which the periodic rates
apply shall also be disclosed.” (Footnotes omitted.)
Second, §226.9(c) requires certain “[s]ubsequent
disclosure requirements”:
“
Change in terms—(1)
Written notice required. Whenever any term required to be
disclosed under §226.6 is changed or the required minimum periodic
payment is increased, the creditor shall mail or deliver written
notice of the change to each consumer who may be affected. The
notice shall be mailed or delivered at least 15 days prior to the
effective date of the change. The 15-day timing requirement does
not apply if the change has been agreed to by the consumer, or if a
periodic rate or other finance charge is increased because of the
consumer’s delinquency or default; the notice shall be given,
however, before the effective date of the change.
“(2)
Notice not required. No notice
under this section is required when the change … results from … the
consumer’s default or delinquency (other than an increase in the
periodic rate or other finance charge).”
The question is whether the
increase in McCoy’s interest rate constitutes a change to a “term
required to be disclosed under §226.6,” requiring a subsequent
disclosure under §226.9(c)(1). One of the initial terms that must
be disclosed under §226.6 is “each periodic rate that may be used
to compute the finance charge … and the corresponding annual
percentage rate.” §226.6(a)(2). McCoy argues that, because an
increase in the interest rate increases the “periodic rate”
applicable to his account, such an increase constitutes a change in
terms within the meaning of §226.9(c)(1). As further support, McCoy
points to two provisions in §226.9(c): first, that notice of an
increase in the interest rate must be provided “before the
effective date of the change” when the increase is due to “the
consumer’s delinquency or default,” §226.9(c)(1); and second, that
no notice is required of a change resulting “from the consumer’s
default or delinquency (other than an increase in the periodic rate
or other finance charge),” §226.9(c)(2). Accordingly, because
§226.9(c) includes interest-rate increases due to delinquency or
default, McCoy argues that the plain text of the regulation
indicates that a change in the periodic rate due to such default is
a “change in terms” requiring notice under §226.9(c)(1).
We recognize that McCoy’s argument has some
force; read in isolation, the language quoted above certainly
suggests that credit card issuers must provide notice of an
interest-rate increase imposed pursuant to cardholder delinquency
or default. But McCoy’s analysis begs the key question: whether the
increase actually changed a “term” of the Agreement that was
“required to be disclosed under §226.6.” If not, §226.9(c)’s
subsequent notice requirement with respect to a “change in terms”
does not apply. Chase argues precisely this: The increase did not
change a term in the Agreement, but merely implemented one that had
been initially disclosed, as required. This interpretation, though
not commanded by the text of the regulation, is reasonable. Section
226.6(a)(2) requires initial disclosure of “each periodic rate that
may be used to compute the finance charge.” The Agreement itself
discloses both the initial rate (Preferred rate) and the maximum
rate to be imposed in the event of default (Non-Preferred rate).
See Brief for Respondent 8, n. 2; Brief for Petitioner
13–14.[
Footnote 4] Accordingly,
it is plausible to understand the Agreement to initially disclose
“each periodic rate” to be applied to the account, and Chase
arguably did not “change” those rates as a result of McCoy’s
default. Instead, Chase merely implemented the previously disclosed
term specifying the Non-Preferred rate.[
Footnote 5]
This reading still leaves the question why
§226.9(c)(1) refers to interest-rate increases resulting from
delinquency or default if such increases do not constitute a
“change in terms.” One reasonable explanation Chase offers is that
§226.9(c)(1) refers to interest-rate increases that were not
specifically outlined in the agreement’s initial terms (unlike
those in the present Agreement). For example, credit card
agreements routinely include a “reservation of rights” provision
giving the issuer discretion to change the terms of the contract,
often as a means of responding to events that raise doubts about
the cardholder’s creditworthiness. An issuer may exercise this
general contract-modification authority and raise the interest rate
applicable to the account to address any heightened risk. See Brief
for Petitioner 6. In such a case, §226.9(c)(1) is best read to
require that notice must be given prior to the effective date of
the increase, because the unilateral increase instituted by the
issuer actually changed a term—the interest rate—in a manner not
specifically contemplated by the agreement.[
Footnote 6] See Comment 9(c)–1 (providing that notice
is required if the agreement “does not include specific terms for
an increase (for example, when an increase may occur under the
creditor’s contract reservation right to increase the periodic
rate)”).
In short, Regulation Z is unclear with respect
to the crucial interpretive question: whether the interest-rate
increase at issue in this case constitutes a “change in terms”
requiring notice. We need not decide which party’s interpretation
is more persuasive, however; both are plausible, and the text alone
does not permit a more definitive reading. Accordingly, we find
Regulation Z to be ambiguous as to the question presented, and must
therefore look to the Board’s own interpretation of the regulation
for guidance in deciding this case. See
Coeur Alaska, Inc.
v.
Southeast Alaska Conservation Council, 557 U. S. ___,
___ (2009) (slip op., at 14) (stating that when an agency’s
regulations construing a statute “are ambiguous … we next turn to
the agencies’ subsequent interpretation of those regulations” for
guidance);
Ford Motor Credit Co. v.
Milhollin,
444 U. S. 555,
560 (1980) (stating that when the question presented “is not
governed by clear expression in the … regulation … it is
appropriate to defer to the Federal Reserve Board and staff in
determining what resolution of that issue” is appropriate).
B
The Board has made clear in the
amicus brief it has submitted to this Court that, in the
Board’s view, Chase was not required to give McCoy notice of the
interest rate increase under the version of Regulation Z applicable
at the time. Under
Auer v.
Robbins,
519 U. S. 452 (1997), we
defer to an agency’s interpretation of its own regulation, advanced
in a legal brief, unless that interpretation is “plainly erroneous
or inconsistent with the regulation.”
Id., at 461
(internal quotation marks omitted). Because the interpretation the
Board presents in its brief is consistent with the regulatory text,
we need look no further in deciding this case.[
Footnote 7]
In its brief to this Court, the
Board explains that the Ninth Circuit “erred in concluding that, at
the time of the transactions at issue in this case, Regulation Z
required credit card issuers to provide a change-in-terms notice
be- fore implementing a contractual default-rate provision.” See
Brief for United States as
Amicus Curiae 11; see also
ibid. (stating that when a term of an agreement authorized
the credit provider “to increase a consumer’s interest rate if the
consumer failed to make timely payments . . . any resulting rate
increase did not represent a ‘change in terms,’ but rather the
implementation of terms already set forth in the initial disclosure
statement”);
id., at 15–16 (stating that “[w]hen a
cardholder agreement identifies a contingency that triggers a rate
increase, and the maximum possible rate that the issuer may charge
if that contingency occurs,” then “no change-in-terms notice is
required” under Regulation Z).[
Footnote 8] Under the principles set forth in
Auer, we give deference to this interpretation.
In
Auer we deferred to the Secretary
of Labor’s interpretation of his own regulation, presented in an
amicus brief submitted by the agency at our invitation.
519 U. S., at 461–462. Responding to the petitioners’ objection
that the agency’s interpretation came in a legal brief, we held
that this fact did not, “in the circumstances of this case, make it
unworthy of deference.”
Id., at 462. We observed that
“[t]he Secretary’s position is in no sense a ‘
post hoc
rationalizatio[n]’ advanced by an agency seeking to defend past
agency action against attack.”
Ibid. (quoting
Bowen v.
Georgetown Univ. Hospital,
488 U. S. 204, 212
(1988)). We added: “There is simply no reason to suspect that the
interpretation does not reflect the agency’s fair and considered
judgment on the matter in question.”
Auer, 519 U. S., at
462.
The brief submitted by the Board in the
present case, at our invitation, is no different. As in
Auer, there is no reason to believe that the
interpretation advanced by the Board is a “
post hoc
rationalization” taken as a litigation position. The Board is not a
party to this case. And as is evident from our discussion of
Regulation Z itself, see Part II–A,
supra, the Board’s
interpretation is neither “plainly erroneous” nor “inconsistent
with” the indeterminate text of the regulation. In short, there is
no reason to suspect that the position the Board takes in its
amicus brief reflects anything other than the agency’s
fair and considered judgment as to what the regulation required at
the time this dispute arose.
McCoy may well be correct in asserting that it
is better policy to oblige credit-card issuers to give advance
notice of a rate increase; after all, both Congress and the Board
have recently indicated that such a requirement is warranted. See
Credit CARD Act, §101(a)(1), 123 Stat. 1735–1736; 12 CFR §226.9(g)
(2009). That Congress and the Board may currently hold such views
does not mean, however, that deference is not warranted to the
Board’s different understanding of what the pre-2009 version of
Regulation Z required. To the contrary, the interpretation the
Board advances in its
amicus brief is entirely consistent
with its past views. The 2004 notice of rulemaking and the 2007
proposed amendments to Regulation Z make clear that, prior to 2009,
the Board’s fair and considered judgment was that “no
change-in-terms notice is required if the creditor specifies in
advance the circumstances under which an increase … will occur,” 69
Fed. Reg. 70931, and “immediate application of penalty pricing upon
the occurrence of certain events specified in the contract” was
permissible, 72 Fed. Reg. 33012.
Under
Auer, therefore, it is clear
that deference to the interpretation in the Board’s
amicus
brief is warranted. The cases McCoy cites in which we declined to
apply
Auer do not suggest that deference is unwarranted
here. In
Gonzales v.
Oregon,
546 U. S. 243 (2006), we
declined to defer because—in sharp contrast to the present case—
the regulation in question did “little more than restate the terms
of the statute” pursuant to which the regulation was promulgated.
Id., at 257. Accordingly, no deference was warranted to an
agency interpretation of what were, in fact, Congress’ words.
Ibid. In contrast, at the time of the transactions in this
case, TILA itself included no requirements with respect to the
disclosure of a change in credit terms. In
Christensen v.
Harris County,
529 U. S. 576 (2000), we
declined to apply
Auer deference because the regulation in
question was unambiguous, and adopting the agency’s contrary
interpretation would “permit the agency, under the guise of
interpreting a regulation, to create
de facto a new
regulation.” 529 U. S., at 588. In light of Regulation Z’s
ambiguity, there is no such danger here. And our statement in
Christensen that “deference is warranted only when the
language of the regulation is ambiguous,”
ibid., is
perfectly consonant with
Auer itself; if the text of a
regulation is unambiguous, a conflicting agency interpretation
advanced in an
amicus brief will necessarily be “plainly
erroneous or inconsistent with the regulation” in question.
Auer, 519 U. S., at 461 (internal quotation marks
omitted). Accordingly, under our precedent deference to the Board’s
interpretation of its own regulation, as presented in the agency’s
amicus brief, is wholly appropriate.
C
McCoy further argues that
deference to a legal brief is inappropriate because the
interpretation of Regulation Z in the Official Staff Commentary
commands a different result. To be sure, the Official Staff
Commentary promulgated by the Board as an interpretation of
Regulation Z may warrant deference as a general matter. See
Anderson Bros. Ford v.
Valencia,
452 U. S. 205, 219
(1981) (holding that “the Board’s interpretation of its own
regulation” should generally “be accepted by the courts”);
Milhollin, 444 U. S., at 565 (“Unless demonstrably
irrational, Federal Reserve Board staff opinions construing [TILA]
or Regulation [Z] should be dispositive”). We find, however, that
the Commentary at issue here largely replicates the ambiguity
present in the regulatory text, and therefore it offers us nothing
to which we can defer with respect to the precise interpretive
question before us.[
Footnote 9]
Cf.
Smith v.
City of Jackson,
544 U. S. 228, 248
(2005) (O’Connor, J., concurring in judgment) (noting that
deference is not warranted when “there is no reasoned agency
reading of the text to which we might defer”).
The Ninth Circuit relied
primarily on Comment 9(c)(1)–3, which states in relevant part that
“a notice of change in terms is required, but it may be mailed or
delivered as late as the effective date of the change . . . [i]f
there is an increased periodic rate or any other finance charge
attri- butable to the consumer’s delinquency or default.” This
exposition of the regulation does not add any clarity to the
regulatory text, which expresses the same requirement. See
§226.9(c)(1) (2008) (“[I]f a periodic rate or other finance charge
is increased because of the consumer’s delinquency or default …
notice shall be given … before the effective date of the change”).
And like §226.9(c), Comment 9(c) is entitled “Change in terms.”
Accordingly, Chase’s plausible interpretation of §226.9(c)(1) is
equally applicable to Comment 9(c)(1)–3: On Chase’s view, because
the interest-rate increase at issue in this case did not constitute
a “change in terms,” the disclosure requirements in the regulation
and Commentary simply do not come into play. See
supra, at
10–11.
Comment 9(c)–1 is also ambiguous, though the
most plausible reading supports Chase’s position more than it does
McCoy’s. The Comment begins: “No notice of a change in terms need
be given if the specific change is set forth initially” in the
agreement. We do not find that the Comment’s addition of the
modifier “specific” to the word “change” enables us to determine,
any more than we could in light of the text of the regulation, see
supra, at 12, whether the interest-rate increase at issue
in this case was a “change in terms” requiring notice. According to
Chase, as long as the agreement explains that delinquency or
default might trigger an increased interest rate and states the
maximum level to which the rate could be increased, the “specific
change” that ensues upon default has been set forth initially and
no additional notice is required before implementation. McCoy
argues to the contrary: Under Comment 9(c)–1, any new rate imposed
after delinquency or default must be disclosed prior to the
effective date, if the particular rate (rather than the maximum
rate) was not specifically mentioned in the agreement. On the
whole, then, the Official Staff Commentary’s explanation of
Regulation Z does not resolve the uncertainty in the regulatory
text, and offers us no reason to disregard the interpretation
advanced in the Board’s
amicus brief.[
Footnote 10]
McCoy further contends that our reliance here
on an agency interpretation presented outside the four corners of
the Official Staff Commentary will require future litigants, as
well as the Board, to expend time and resources “to comb through …
correspondence, publications, and the agency’s website to determine
the agency’s position.” Brief for Respondent 37–38. We are not
convinced. McCoy may be correct that the Board established the
Official Staff Commentary so as to centralize its opinion-making
process and avoid “overburdening the industry with excessive detail
and multiple research sources.” 46 Fed. Reg. 50288. But his
suggestion that, if we accord deference to an
amicus
brief, all other “unofficial” sources will be fair game is of no
moment. Today we decide only that the
amicus brief
submitted by the Board is entitled to deference in light of “the
circumstances of this case.”
Auer, 519 U. S., at 462.
Accordingly, we conclude that, at the time of
the transactions at issue in this case, Regulation Z did not
require Chase to provide McCoy with a change-in-terms notice before
it implemented the Agreement term allowing it to raise his interest
rate following delinquency or default.
* * *
For the foregoing reasons, the
judgment of the United States Court of Appeals for the Ninth
Circuit is reversed, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
Footnote 1
As discussed more fully below, see
infra, at 4–5, in 2009 the Board amended Regulation Z,
such that the provisions discussed in this opinion are no longer in
effect. However, because the pre-2009 provisions are the ones
applicable to the case before us, we will refer to them in the
present tense.
Footnote 2
McCoy also asserted various state-law claims
that are not before us. We note that McCoy’s complaint provides
little detail regarding the transactions at issue in this case. The
parties, however, are in agreement as to the essential facts
alleged.
Footnote 3
The United States Court of Appeals for the
Seventh Circuit has also rejected the reasoning of the Ninth
Circuit, though on a different question than the one presented in
this case. See
Swanson v.
Bank of America,
N. A., 559 F. 3d 653, reh’g denied, 563 F. 3d
634 (2009) (disagreeing with the Ninth Circuit’s interpretation of
Regulation Z).
Footnote 4
The Pricing Schedule referred to in the
Agreement is not contained in the case record, nor are its contents
apparent from the parties’ briefs, but neither side disputes that
it specified a maximum Non-Preferred rate applicable to the
Agreement.
Footnote 5
We are not persuaded by McCoy’s argument
that, although Chase did not change a “contract term” when it
raised his interest rate pursuant to the terms of the Agreement, it
changed a “credit term,” thereby triggering §226.9(c)’s notice
requirement. The relevant text of Regulation Z does not refer to,
let alone distinguish between, “contract terms” and “credit terms,”
and McCoy’s repeated citations to TILA’s broad policy statement do
not convince us that such a distinction is warranted. See 15 U.
S. C. §1601(a) (“It is the purpose of this subchapter 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”).
Footnote 6
The Government offers an alternative example.
Assume that the agreement is similar to the one at issue here, with
a specified maximum level to which the interest rate can be
increased if the cardholder defaults. If default occurs but the
issuer raises the rate above the contractual maximum, notice must
be given prior to the effective date because the issuer actually
changed the term of the contract initially specifying the maximum
rate possible. See Brief for United States as
Amicus
Curiae 14–15.
Footnote 7
We note that, in reaching its decision, the
Ninth Circuit did not have the benefit of briefing from the Board.
The Ninth Circuit apparently did not solicit the views of the Board
in the proceedings below, see Brief for Petitioner 16, and the
First Circuit did not solicit the Board’s views in
Shaner
v.
Chase Bank USA,
N. A., 587 F. 3d 488
(2009), until after the Ninth Circuit issued its opinion in this
case, see Order in No. 09–1157 (CA1, Aug. 4, 2009).
Footnote 8
This is consistent with the view the Board
advanced in its
amicus brief to the First Circuit, in
which the Board noted that it “has in- terpreted the applicable
provisions of Regulation Z not to require a pre-effective date
change-in-terms notice for an increase in annual per-centage rate
when the contingency that will trigger a rate increase and the
specific consequences for the consumer’s rate are set forth in the
initial card member agreement.” App. to Brief for United States as
Amicus Curiae 2a.
Footnote 9
We are not persuaded by McCoy’s argument that
the Board’s own regulations make the Official Staff Commentary “the
exclusive source of authorized staff opinion.” Brief for
Respondent 36 (emphasis added). In the regulations McCoy cites the
Board has indicated only that the central purpose of the Commentary
is to present agency interpretations that, if relied upon, provide
the basis for invoking the good-faith defense to liability under
TILA. See 15 U. S. C. §1640(f) (precluding liability for “any
act done or omitted in good faith in conformity . . . with any
interpretation … by an official or employee … duly authorized by
the Board to issue such interpretations … under such procedures as
the Board may prescribe”); 12 CFR pt. 226, App. C (2008)
(“[O]fficial staff interpretations of this regulation … provide the
protection afforded under [§1640(f)]”);
id., Supp. I,
Introduction ¶1, p. 451 (same); 46 Fed. Reg. 50288 (1981) (same).
McCoy cites no authority indicating that, in promulgating the
Commentary and establishing certain statutory safe harbors, the
Board intended to limit its ability to issue authoritative
interpretations for other purposes.
Footnote 10
In concluding otherwise, the Ninth Circuit
focused on the examples Comment 9(c)–1 provides of changes that, if
set forth initially, require no further disclosure when put into
effect:
“No notice of a change in terms need be given if the specific
change is set forth initially, such as: Rate increases under a
properly disclosed variable-rate plan, a rate increase that occurs
when an employee has been under a preferential rate agreement and
terminates employment, or an increase that occurs when the consumer
has been under an agreement to maintain a certain balance in a
savings account in order to keep a particular rate and the account
balance falls below the specified minimum.”
The Ninth Circuit concluded that, in contrast
to each of these three examples, “the increase here occurs at
Chase’s discretion.” 559 F. 3d 963, 966 (2009). That is, once
the triggering event—McCoy’s default—occurred, Chase had the
latitude to increase the interest rate as it saw fit (up to the
limit specified in the Pricing Schedule).
We are not persuaded by the Ninth Circuit’s
reasoning. Certainly, under a “variable-rate” plan the interest
rate fluctuates according to an external variable easily
discernable by the cardholder (like the Federal Prime rate), and
the issuer has no discretion. See
ibid. But the Comment’s
second and third examples do not appear to be significantly
different from this case: The agreement contains a preset rate, but
it also provides that, on the occurrence of a predefined event
(terminating employment or a low account balance), the rate will
increase.
Moreover, Comment 9(c)–1 further states that
notice is needed “if the contract allows the creditor to increase
the rate at its discretion but does not include specific terms for
an increase”—for example, “when an increase may occur under the
creditor’s contract reservation right to increase the periodic
rate.” It would seem that the narrower latitude Chase had under the
Agreement to set the precise new rate within a specified range
after McCoy defaulted is not the kind of “discretion” the last
example of Comment 9(c)–1 contemplates. In short, analogizing to
the Comment’s examples suggests that Chase’s action in setting a
new rate was most likely a “specific change” that the Agreement
itself contemplated, and subsequent disclosure was not clearly
required.
Comments
Be the first to comment
Leave a Comment