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Consider the following scenario:

  1. Consumer opens a credit card account with bank, signs cardmember agreement
  2. Consumer uses card regularly, pays bills
  3. Consumer calls bank and closes credit card account
  4. Bank does not disclose that account has a balance at time of closure
  5. Consumer fails to pay balance as a result of (4)
  6. Bank reports account to credit bureaus as delinquent

What causes of action against the bank for (3)? Negligent misrepresentation?

The consumer relied on the misrepresentation, but it did not induce them to enter into the contract, as it occurred after the contract was signed.

EDIT:

The contract states the customer "will receive billing statements" and that the customer agrees to "pay the minimum payment by the due date [on the statement]". The statement is furthermore the "official" record of the account. This suggests that the consumer's duty to pay by a particular date is conditioned upon receipt of a billing statement.

The account agreement also states "You will receive a billing statement, if one is required, each month It will show your minimum required payment." "Required" is not defined in the agreement. Presumably it is a reference to the provisions of the Fair Credit Billing Act (statement required if balance >= $1).

Customer claims they never received statements, before or after the account's closure. Customer notified bank that they did not receive statements repeatedly, with a record of such a notification occurring as late as one week prior to the account's closure.

The customer is ultimately liable for the balance, of course. But that is not what is reported to the credit bureaus. Payments were reported, e.g., as "30+ days late". Can a payment be "late" when the due date is on a statement that the customer does not have?

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    Bad news: all plausible causes of action are against the cardholder.
    – bdb484
    Aug 29, 2021 at 21:16
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    @DavidSiegel North Carolina. The agreement also states "You will receive a billing statement, if one is required, each month It will show your minimum required payment." Required is not defined in the agreement. Presumably it is a reference to the provisions of the Fair Credit Billing Act (statement required if balance >= $1).
    – Josh Johnson
    Aug 30, 2021 at 0:07
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    Shouldn't the question be about (4), not (3)?
    – Barmar
    Aug 30, 2021 at 15:09
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    Is this a hypothetical, or is there really a bank that doesn't send regular monthly statements whenever there's a balance? Do they also not provide online access to statements? And doesn't the cardholder agreement specify the day of the month when minimum payment is due to avoid late fees?
    – Barmar
    Aug 30, 2021 at 15:17
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    I'll point out that even if laws require a paper statement to be sent to the customer, there's no way to require it to be delivered. The vast majority of mail gets where its going in a reasonable amount of time, but accidents do happen and it may never arrive. I can't imagine that "I never got the statement" would be a valid defense against not having paid. Maybe for customer support to waive a late fee, but not for not paying your balance at all.
    – Bobson
    Aug 30, 2021 at 20:56

2 Answers 2

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There is no misrepresentation by the bank as you describe it, there is negligence by the account holder to comply with the terms of the account. The bank made no representation at all regarding a balance due. If you want the bank to be at fault, they the customer would have to demand a declaration as to the existence of a balance due (choose your words carefully), and the bank would have to have falsely asserted that there is no present or future obligation. This is not going to happen. All the bank can say is that they have no present record of charges. The customer's question might be something like "Do you guarantee that there will be no charges to this account as of now". Of course, the bank cannot know whether there is a forthcoming paper charge that was made at some mountain resort. If case they did make such a promise, you could disavow the debt, using your reliance on their assertion as the basis for denying the debt.

There is no law requiring banks to warn people of their contractual obligations when they close an account. I've never encountered a credit card contract that includes such a clause, but I suppose some bank might include a mandatory-warning clause, in which case they could be in breach of contract.

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  • See edit for a pertinent detail. Also, an omission of material fact can be considered misrepresentation, no? It is seems reasonable for an unsophisticated consumer to believe that, by definition, they cannot "close" an account that has a balance.
    – Josh Johnson
    Aug 29, 2021 at 23:21
  • With respect to the present balance versus future balance, that is a very interesting point. In the instant example, the balance in the instant example accrued months prior to the account's closure. The account had been quiescent for some time.
    – Josh Johnson
    Aug 30, 2021 at 8:53
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    @JoshJohnson: An omission can be considered misrepresentation. However, absent a "duty to speak" (i.e., a law or contract explicitly requiring disclosure) , any information that the plaintiff "should" know will typically not count. E.g., in this NC case, the judge points out that information will not qualify unless you are "unable to discover [it] through reasonable diligence." It is unlikely that an account balance qualifies for this.
    – Brian
    Aug 30, 2021 at 13:32
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    @JoshJohnson: Probably not. The fact that a specific customer customer didn't discover the balance through "reasonable diligence" does not mean a customer could not discover the balance through "reasonable diligence." Further, I would argue that not discovering the balance would constitute proof (from the court's perspective) that the customer did not exercise reasonable diligence. At a minimum, the accountholder would know the account had a balance because they were the one who used the card.
    – Brian
    Aug 30, 2021 at 14:18
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    My experience is you cannot close a credit card if it has a balance, but that's probably a difference between banking in Australasia and other countries. I had a case where every time I tried to close an account the bank decided after the fact that a fee was due, added it and that triggered an automatic reactivation of the account, it was a total pain to deal with.
    – David Waterworth
    Aug 31, 2021 at 1:26
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It could be a breach of contract if the contract requires the bank to report the account balance to the consumer. It could be a violation of banking laws of they require such a statement of the balance. It could be both.

Did the consumer ask what the balance was? How was the monthly balance statement communicated to the consumer during the life of the account? What does the cardmember agreement say about closing the account, the procedure for doing so, or the status of unpaid charges at the point of the account's closure?

To the extent that misrepresentation inducing the consumer to enter into the contract might be involved, it could be on the argument that the lender always intended not to send statements if the account was closed with an outstanding balance and lied about that by putting something into the cardmember agreement claiming that they would. That would of course be nearly impossible to prove without access to internal documents that you can't likely get -- if they even exist. Beach of contract and violation of fair lending practice laws are much easier to demonstrate.

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  • See edit w.r.t. monthly statements.
    – Josh Johnson
    Aug 29, 2021 at 23:23
  • Agreement does not contain a procedure for closing the account or define "close". It does say that, in the context of the bank closing the account, that the customer remains liable for any balance.
    – Josh Johnson
    Aug 29, 2021 at 23:23
  • Consumer did not ask as (1) they were under the impression that there was no balance and (2) they did not believe that it was possible for a customer to "close" an account with a balance. The fact that the bank did close the account without disclosing a balance was taken to imply there was no balance.
    – Josh Johnson
    Aug 29, 2021 at 23:26

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