The borrower sued the bank, alleging that the bank’s agreement for variable-rate credit cards violated the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) by allowing increased interest rates on outstanding credit card balances. The CARD Act generally prohibits banks from changing rates on outstanding balances, but an exception “permits increases in a variable annual percentage rate if the rate changes according to the operation of an index that is not under the creditor's control and is available to the general public.” 15 U.S.C.S. § 1666i-1(b)(2). The bank calculated its variable rates by adding a fixed margin to the U.S. Prime Rate “on the last publication day of each month.” The bank then applied that rate to the entire billing cycle, even for prior purchases. The borrower claimed both the method used to calculate the rate and the application of the rate to outstanding balances violated the CARD Act. The district court found the bank’s actions did not violate the CARD Act and dismissed the case under Rule 12(b)(6).
In Milliken v. Bank of Am., N.A., 162 F.4th 1030 (9th Cir. 2025), the Ninth Circuit affirmed the district court’s dismissal of the case. The court held that the bank’s credit card agreement complied with the CARD Act’s variable-rate exception in 15 U.S.C. § 1666i-1(b)(2). The court explained that the U.S. Prime Rate formed the only variable that affected the interest rate, and because the U.S. Prime Rate is both publicly available and outside of the bank’s control, it properly fit under the statutory exception. Further, the court found that the CARD Act exception requires only that rate changes occur “according to operation of an index” and contained no day-to-day conformity requirement. The court also noted that the borrower’s argument ignored the consideration that decreases in the Prime Rate would benefit cardholders just as increases could harm them.
By Deanna Dulske [email protected]
Edited By Noah Coggan [email protected]
Edited By Landon Womack [email protected]
Edited By Taylor O’Brien [email protected]