Auto Pay
Chen v. Bank of America
Date: July 9, 2024
Issue: Whether Bank of America (BofA) violated California’s Consumer Legal Remedies Act (CLRA), False Advertising Law (FAL) and Unfair Competition Law (UCL) by not telling its customers their automatic payment, or auto pay, settings would be canceled if they did not continuously use their credit cards.
Case Summary: A California federal court granted in part and denied in part BofA’s motion for judgment on the pleadings in a lawsuit alleging it unlawfully failed to tell its customers their auto pay settings would be canceled if they did not continuously use their credit cards.
Plaintiff Jeffrey Chen had a credit card with BofA and was enrolled in the bank’s auto pay program. According to Chen, his auto pay registration was canceled automatically, without his knowledge, because he had not used his credit card for a specific period. This, in turn, led to the bills paid through his auto pay account going unpaid, which negatively impacted his credit score. Chen sued BofA, alleging it violated the CLRA, FAL and UCL by not disclosing in its agreements, advertising or promotional materials that customers would automatically be unenrolled from the auto pay program for not using their credit card for some time. Chen also alleged BofA made false statements and released misleading information about the need to use credit cards to maintain bill-pay registration continuously.
In response, BofA filed a motion for judgment on the pleadings, arguing the bank is not the proper defendant as it did not engage in the conduct at issue; the documents incorporated by reference into the Complaint reflect the alleged omissions were disclosed; Chen failed to satisfy the pleading requirements of Federal Rule of Civil Procedure 9(b); Chen lacks standing under the UCL, FAL and CLRA; and the CLRA does not apply to credit card or auto pay programs.
Judge Dana Sabraw of the Southern District of California granted in part and denied in part BofA’s motion. First, the court rejected BofA’s argument that the documents incorporated by reference into the Complaint reflect the alleged omissions were disclosed. In support, BofA relied on its online service agreement obtained from its website. However, the court maintained whether this was the document referenced in Chen’s complaint was unclear. Absent a clear showing this was the document referenced in the complaint, the court declared it could not consider it in ruling on the motion.
Second, the court rejected BofA’s Rule 9(b) argument. Under Rule 9(b), the plaintiff must identify “the who, what, when, where and how” of the misconduct charged. Applying this standard, the court concluded Chen identified: “who” (BofA); “what” (failed to inform auto pay customers their enrollment would be canceled if the credit card was not used for some time); “when” (the “several years” before June of 2023 when Plaintiff discovered his registration in auto pay had been canceled); “where” (in the Credit Card Agreements or other documents); and “how” (absent the disclosure, Chen believed his enrollment in auto pay would continue uninterrupted). The court thus concluded Chen satisfied Rule 9(b)’s pleading requirements.
Third, the court rejected BofA’s argument on standing. The court noted, “to show standing under the UCL and FAL, [the plaintiff] must aver facts establishing he suffered an injury in fact and has lost money or property due to the unfair competition.” Further, a plaintiff must prove he relied on “the allegedly deceptive or misleading statements.” BofA argued Chen did not identify the materials relied on upon signing up for the auto pay program. But the court found that Chen pleaded reliance because, had the omitted information been disclosed, he would have known about it and behaved differently.
However, the court agreed with BofA that the CLRA does not apply to credit cards or auto pay programs. BofA relied on Berry v. Am. Express Publishing Inc., which concluded credit transactions are not covered under the CLRA. BofA cited no cases related to the auto pay program. Instead, BofA argued the CLRA’s plain language makes it clear it does not apply to credit cards or auto pay programs. Chen contended credit card cases are distinguishable because they involve debt collection. Still, according to the court, Chen did not plead a debt collection claim. Chen also contended the CLRA commands it be “liberally construed” to protect consumers against unfair and deceptive business practices. But the court emphasized this command does not override the statute’s plain language.
Bottom Line: A trial is scheduled for March 24, 2025.
Documents: Order
