In Rose v. Bank of America, N.A. (— Cal.Rptr.3d —-, Cal.App. 2 Dist., November 21, 2011), a California Court of Appeal held that consumers could not bring suit under state law such as California’s Unfair Competition Law (“UCL”) to enforce provisions of the federal Truth In Savings Act (“TISA”), which requires “clear and uniform” disclosure from financial institutions to consumers about interest rates paid and fees assessed. The Court ruled that when Congress amended TISA to repeal consumers’ rights to privately enforce it, its intent was to prohibit all private actions alleging TISA violations and that a suit brought under UCL to enforce TISA was therefore not permitted.
Congress passed TISA in 1991 to require "clear and uniform" disclosure from financial institutions to consumers about interest rates paid and fees assessed so that consumers could make informed decisions about depositing money into their accounts. Originally, TISA provided for a right of action against an institution that failed to comply with disclosure requirements. In 1996, Congress amended TISA to repeal the private right of action effective September 30, 2001.
A group of depositors at Bank of America ("Bank") brought suit against the bank alleging the bank failed to properly notify them about fee increases to their accounts. They alleged that inconspicuous written notices in their bank statements of the fee increases were inadequate warning. They charged that the Bank's inadequate notification violated TISA and brought action under UCL alleging the TISA violation constituted unfair business practices. The Bank demurred and the trial court sustained the demurrer finding the repeal of TISA's private enforcement provision also precluded enforcement under state laws such as UCL. The depositors appealed.
The Court ruled that Congress, when it expressly repealed the provision allowing individuals to enforce TISA, clearly showed its intent to disallow all such private actions, whether direct or indirect, through state laws such as UCL. Later, the Court added, Congress considered and rejected legislation to reinstate that right. The Court found that plainly, Congress' intent was to provide federal authorities alone, and not consumers, with standing to bring actions to enforce TISA. "Allowing private plaintiffs to recover on a UCL claim based solely on TISA violations would constitute an 'end run' around the limits on enforcement set by Congress," the Court reasoned.
The Court added that the depositors failed to show that the Bank's action was unfair or had caused them substantial injury. Citing a number of test cases of those standards under UCL, the Court found that the Bank did not cause "grave harm" to the depositors, nor did its fee increases constitute "unethical or immoral conduct," because the depositors remained free to avoid the increases by moving their accounts to different institutions.
Because UCL was not violated on its face, and UCL may not be used to address TISA violations, the trial court correctly dismissed the depositors' action to enforce TISA by a UCL action. The judgment was affirmed.
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