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UPDATE ON PFENNIG: SIXTH CIRCUIT ISSUES AMENDED OPINION IN CASE HOLDING THAT CERTAIN OVERLIMIT FEES CONSTITUTE FINANCE CHARGES

On July 2, 2002, the United States Court of Appeals for the Sixth Circuit amended its April 11, 2002 opinion in Pfennig v. Household Credit Services, Inc. and MBNA America Bank, N.A., 286 F.3d 340 (6th Cir. 2002). The amendments do not alter the April 11 holding that struck down the Regulation Z definition of “finance charge,” which expressly excludes overlimit fees, because, according to the Pfennig court, overlimit fees imposed after a credit card holder is permitted to make purchases beyond the established credit limit fall “squarely within the [Truth in Lending Act] definition of a finance charge.” Consequently, the court reversed the trial court’s dismissal of Pfennig’s class action complaint for failure to state a claim upon which relief could be granted and remanded the case to the United States District Court for the Southern District of Ohio for trial on the merits of the claim.

The only difference between the original and amended majority opinions is the addition of a footnote. New footnote 2 indicates that the defendants and several amici filed petitions for rehearing and suggestions for rehearing en banc, but that the Pfennig court denies those petitions because it is barred from a procedural standpoint from considering the new factual issues raised by the amici. Per Rule 35 of the Sixth Circuit Rules of Appellate Procedure and Sixth Circuit Internal Operating Procedures, counsel for the appellee Household will have 14 days from the date the amended opinion was filed (July 2, 2002) in which to withdraw, modify or maintain its pending petition for rehearing en banc or to file a new petition. Appellant Pfennig will also have the opportunity to file a petition for rehearing within that 14 day period. Thus, the parties must make a decision as to how to proceed by July 16, 2002. Another option would be to file a petition with the United States Supreme Court for a writ of certiorari.

The dissenting opinion by Judge Edgar contains a new paragraph regarding the amici briefs that reiterates his opinion that it is inappropriate for the majority to conclude that Regulation Z is not a permissible interpretation of TILA.

For more information regarding this Alert or copies of the opinions, contact Judy Scheiderer at (614) 628-1607 or jscheiderer@dltlaw.com .