The Supreme Court ruled that JPMorgan Chase & Co. under an old federal regulation did not have to provide written notice before raising credit card interest rates to account holders who defaulted on a payment.
The justices unanimously overturned a ruling by a U.S. appeals court in California that a class-action lawsuit filed against the bank in 2004 could go forward.
The Federal Reserve Board regulation at issue in the high court's ruling was amended in 2009 to require advance notice of 45 days for higher interest rates.
The lead plaintiff in the suit, James McCoy, had accused Chase Manhattan Bank of violating federal law by raising interest rates retroactively to the beginning of his payment cycle after his account was closed after a late payment.
Chase said that in its cardmember agreement it disclosed the conditions that McCoy had to comply with to remain eligible for the lower interest rate, as well as the maximum interest rate that could apply if he violated those terms.
Chase said McCoy's contract had explicit provisions that allowed for increased interest rates for cardmembers in default.
The Obama administration, reflecting the Federal Reserve Board's views, supported the bank and said the old regulation did not require a credit card issuer to provide notice before increasing interest rates due to default.
The Supreme Court, in a 19-page opinion written by Justice Sonia Sotomayor, agreed.
At the time of the transactions at issue in the case, the regulation did not require Chase to provide McCoy with a notice before raising his interest rate up to a pre-set maximum amount following delinquency or default, she said.
The Supreme Court case is Chase Bank USA v. McCoy, No. 09-329.
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