PHILADELPHIA -- Fleet Bank's offer of a MasterCard with a fixed 7.99-percent interest rate -- that jumped to 10.5 percent a year later -- may have misled "a reasonable consumer," a federal appeals court has ruled.
The 3rd U.S. Circuit Court of Appeals, overturning a lower court's decision, said plaintiff Denise Roberts could pursue a class-action lawsuit against Fleet Credit Card Services.
A victory could lead to more explicit disclosures on the written offers that consumers receive, her lawyer said.
"Everybody gets credit-card solicitations in the mail on a daily basis," said lawyer Ira Richards of Philadelphia. "It's hard to lay them next to each other and pick the best one, and picking the best one is important because it has financial consequences."
A spokeswoman for Fleet, which last year agreed to a $5.5-million settlement in a 3rd Circuit suit over annual fees, said Thursday that the company had no immediate comment.
Fleet's credit-card division is headquartered in Rhode Island but maintains its administrative offices in Horsham, a Philadelphia suburb.
Fleet's offer for a Titanium MasterCard said the 7.99 annual percentage rate was not an introductory rate and that "[i]t won't go up in just a few short months," according to Wednesday's ruling, written by U.S. Circuit Judge Julio M. Fuentes.
Roberts received the mailing in May 1999 offering a "7.99 fixed APR" on both purchases and balance transfers.
The application included a "Schumer Box" -- the table of basic information required under the federal Truth in Lending Act -- that listed only two reasons the rate could change: if the consumer failed to meet repayment rules or closed the account.
The back of the application listed terms of the offer, including language that said "my agreement terms [including rates] are subject to change."
Fleet, after notifying Roberts of a rate hike, raised the interest rate in July 2000.
"We agree with Roberts that Fleet's solicitation materials could cause a reasonable consumer to be confused about the temporal quality of the offer," the appeals court wrote, overturning District Judge John P. Fullam's dismissal of the Truth in Lending claim.
After a similar 3rd Circuit ruling last year, Fleet settled a case involving more than 5,000 people who sued over an annual fee. Lead plaintiff Paula Rossman, an Oregon homemaker, charged that Fleet promised her a Platinum MasterCard with no annual fee only to add a $35 fee less than a year later.
"I suspect they increased the annual fee of people who weren't using the cards very much, and increased the rate of people who are revolving [their credit] all the time," said lawyer Michael Donovan of Philadelphia, who filed the Rossman suit.
He said the court rulings may lead banks to word their solicitations more carefully, but doubts they'll change their business practices much.
"It clearly hasn't stopped them from raising people's rates, even in this low interest-rate environment," Donovan said.
Richards declined to identify Roberts, his lead plaintiff, except to say she lives in the Eastern District of Pennsylvania.
