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A consumer calls his bank and requests that his account be closed.

The bank says that the account has been closed, and changes the status of the account such that the account can no longer be used to make purchases. However, it does not disclose that a balance remains. The consumer is subsequently charged a late fee.

The consumer files suit, alleging that it was a misrepresentation for the bank to claim that his account had been "closed", as a closed account--by definition--cannot carry a balance.

The bank argues that, under the accepted industry usage of a "closed" credit card account, an account can carry a balance. The bank also points to a sentence in the credit card agreement that states "[e]ven if your account is closed or suspended, you must still repay all amounts you owe under the account".

The consumer argues that the industry usage is irrelevant. The contract was not between two parties within the banking industry, it was between a bank and a consumer. In common usage, a "closed" account cannot carry a balance -- Merriam-Webster defines a "closed account" as "an account whose total debit and total credit entries are equal and show no balance".

He also points to the fact that, under the terms of the contract, the only party with an express right to "close" the account is the bank. The single reference to the consumer in connection with account termination uses the word "cancel" rather than "close" suggesting that the parties have different termination rights. At best, the contract is ambiguous and has the capacity to mislead the average consumer.

Whose meaning prevails?


Below are all of the references to account closure, cancellation, or suspension in the cardmember agreement.

Under a section titled "default":

If your account is in default, we may close it without notice and require you to pay your unpaid balance immediately. We can also begin collection activities. To the extent permitted by law, if you are in default because you have failed to pay us, we will require you to pay our collection costs, attorneys' fees, court costs, and all other expenses of enforcing our rights under this agreement.

Under a section titled "automatic charges":

You may set up scheduled and repeat transactions to your account. If your account is closed or suspended, or your account number changes, you will need to contact any persons that you are paying by automatic transactions.

Under a section titled "authorization of transactions / closing your account":

We are not obligated to honor every transaction, and we may close or suspend your account. Sometimes we close accounts based not on your actions or inactions, but on our business needs.

In the context of "what happens if my account is closed or suspended?":

Even if your account is closed or suspended, you must still repay all amounts you owe under the account.

In the context of "annual membership fee":

Your monthly billing statement will tell you how to cancel your account and avoid future annual fees.

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    The answer could easily come out either way. The law is not completely predictable. A trial judge could say one thing, and appellate judges could in good faith say the opposite. There is no clear rule, just general principles to argue.
    – ohwilleke
    Nov 17, 2021 at 1:44

1 Answer 1

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The bank's

From the quoted terms it is clear that the contract contemplates a potential non-zero balance at the time an account is closed. There is no suggestion that an account must have a zero balance in order to be closed; indeed, the terms clearly spell out the consequences if an account is closed with a non-zero balance.

The bank's reference to industry usage, like the consumer's reference to dictionary definitions of "closed" is irrelevant when the meaning is clear on the face of the contract. Extrinsic materials are only relevant when the meaning is ambiguous and the quoted terms leave no room for ambiguity: a closed account can have a non-zero balance.

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