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Dreher Tomkies LLP
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Columbus, Ohio 43215
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Sixth Circuit Holds That Certain Overlimit Fees Constitute Finance Charges

PFENNIG V. HOUSEHOLD CREDIT SERVICES, INC. AND MBNA AMERICA BANK, N.A.

by Judith M. Scheiderer and Tiffany D. Scurti-Swain*

The United States Court of Appeals for the Sixth Circuit, on April 11, 2002, reversed the dismissal of a consumer’s credit card disclosure class action complaint under the Truth in Lending Act (TILA) against the issuing bank and the subsequent purchaser of the portfolio. The court remanded the case to the United States District Court for the Southern District of Ohio for trial on the merits of the claim.

The appellate court found that overlimit fees imposed after a credit card holder is permitted to make purchases beyond the established credit limit fall "squarely within the statutory definition of a finance charge" as "incident to an extension of credit." According to the court, Regulation Z’s exclusion of such overlimit fees from the definition of "finance charge" conflicts with the express language of TILA. The court held that the creditor should have disclosed the fees as part of the finance charge on the periodic billing statements. The court limited its holding to those creditors who knowingly permit the credit card holder to exceed the established credit limit and then impose a fee incident to that extension of credit.

There are several strategies for addressing the issues raised by the court’s holding regarding disclosure of overlimit fees. If we can be of any assistance or if you would like a copy of the decision, please do not hesitate to call us.

*Judy is a partner and Tiffany is an associate with Dreher Tomkies LLP. Both are contributors to the Firm’s Credit Card Digest. Their direct dial numbers are 614-628-1607 and 614‑628‑1615, respectively.