CARD Act
Milliken v. Bank of America N.A.
Date: Dec. 29, 2025
Issue: Whether Bank of America’s (BofA) method for calculating interest on variable-rate credit cards violated the Credit Card Accountability Responsibility and Disclosure Act (CARD Act).
Case Summary: In a unanimous decision, a Ninth Circuit panel affirmed a California federal court’s dismissal of a lawsuit alleging BofA’s formula for calculating interest on variable-rate credit cards violated the CARD Act.
The CARD Act generally prohibits credit card issuers from increasing the annual percentage rate, fees, or finance charges on existing balances. However, the CARD Act permits increases at a variable annual percentage rate when the card agreement ties the rate to a public index that the creditor does not control.
In July 2023, Austin Milliken sued BofA in the Northern District of California, alleging it violated the CARD Act by calculating interest on variable-rate credit cards using a formula that adds a fixed margin to the U.S. Prime Rate and applies that rate to the entire billing cycle. The Prime Rate is the base rate on corporate loans set by most large U.S. banks and is tied to the Federal Funds Rate.
Between March 2022 and July 2023, the Federal Reserve raised the Federal Funds Rate 10 times, increasing the Prime Rate from 3.25 percent to 8.25 percent. BofA adjusted its variable-rate credit card interest rates accordingly and applied those higher rates to balances incurred before the increases, which Milliken claimed violated the CARD Act.
Dismissing the lawsuit, Judge Araceli Martinez-Olguin concluded Milliken failed to state a CARD Act violation. The court ruled BofA’s interest-rate formula fell squarely within the CARD Act’s exception allowing variable-rate increases when a credit card agreement links the rate to a public index outside the creditor’s control.
On appeal, the Ninth Circuit panel affirmed, concluding Milliken’s credit card agreement fit within the CARD Act’s variable-rate exception. The panel applied the statute’s plain meaning and explained that, although the CARD Act generally limits rate increases on existing balances, it allows increases when a card agreement ties the variable rate to a public index outside the creditor’s control. Because BofA calculated its variable rate by adding a fixed margin to the U.S. Prime Rate, a public benchmark that BofA does not control, the panel ruled the agreement satisfied the statutory exception.
The panel also rejected Milliken’s claim that BofA violated the CARD Act by applying the month-end Prime Rate to the entire billing cycle. The panel explained the CARD Act requires rate changes to follow the operation of an index, not daily index movements, or a specific date. Under BofA’s agreement, the Prime Rate published at the end of the month set the rate, and any change in the Prime Rate produced the same change in the cardholder’s interest rate. The panel pointed out that this method gave BofA no discretion over rate changes.
Finally, the panel rejected Milliken’s policy-based arguments that BofA’s approach resulted in improper retroactive interest charges or undermined consumer protections. Noting the same pricing method benefits cardholders when rates fall, the court explained the CARD Act does not shield consumers from the ordinary risks of lawful variable-rate agreements. Because interest rates changed only when the Prime Rate changed, and because BofA did not control that index, the panel affirmed dismissal.
Bottom Line: The Ninth Circuit confirmed that BofA’s Prime Rate-based method for setting variable credit card interest complies with the CARD Act and may lawfully apply rate changes across an entire billing cycle.
Document: Opinion
