Thursday, February 1, 2007
C.A.: Consumer Legal Remedies Act Does Not Cover Issuance of Credit Card
By TINA BAY, Staff Writer
Credit transactions separate and apart from the sale or lease of goods or services are not covered by the California Consumer Legal Remedies Act, the Fourth District Court of Appeal ruled yesterday.
Div. Three affirmed a ruling by Orange Superior Court Judge Thierry P. Colaw, who sustained a demurrer by three American Express-related entities to a complaint based on the CLRA.
In a putative class action, Samuel A. Berry alleged that American Express Travel-Related Services Company, Inc., American Express Centurion Bank, Inc., and American Express Publishing, Inc. violated Sec. 1770(a) of the CLRA by including an unconscionable arbitration provision in their agreements with cardholders.
Sec. 1770(a) prohibits methods of competition and unfair or deceptive acts or practices “in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.”
Berry, a longtime American Express cardholder, filed suit after he discovered a $43 charge on his October 2004 statement for a magazine subscription he never ordered. The magazine was published by American Express Publishing.
The subscription was cancelled and the charge was removed after Berry notified American Express Publishing and American Express Bank of the situation.
In his initial complaint, Berry alleged several causes of action for damages and injunctive relief and claimed that American Express charged cardholders for magazines that were never ordered.
He later amended his complaint to assert the single injunctive relief claim against the arbitration provision in the cardholder agreement he received from American Express.
The provision, which required cardholders to arbitrate all non-small claims disputes and barred them from pursuing class action relief, fell within the CLRA because an American Express card is a “good” or “service,” Berry alleged.
Colaw sustained the defendants’ demurrers which asserted that the issuance of a credit card to Berry was not a “goods or services” transaction falling within the scope of Sec. 1770(a).
Div. Three concluded on first impression that the Legislature did not intend for the issuance of a credit card to be covered by the CLRA.
Justice Richard M. Aronson, writing for the court, explained:
“The extension of credit is not a tangible chattel. True, a plastic card is tangible. But the card has no intrinsic value and exists only as indicia of the credit extended to the card holder. Berry’s AMEX card is thus not a ‘good.”
Nor was the issuance of a credit card intended to be treated as a “service” in connection with the sale of goods, the justice added, rejecting Berry’s argument that “a consumer cannot hire a car, reserve airline tickets, stay in a hotel, or make purchases on the internet without a credit card.”
While early drafts of the CLRA included references to “money” and “credit” in the definition of consumer, those references were removed before the law’s enactment, Aronson wrote.
“[T]he Legislature’s deletion of the terms ‘money’ and ‘credit’ from CLRA’s definition of ‘consumer’ strongly counsels us not to stretch the provision to include extensions of credit unrelated to the purchase of any specific good or service,” he said.
Justices Richard D. Fybel and William F. Rylaarsdam concurred in the opinion.
The case is Berry v. American Express Publishing, Inc., 07 S.O.S. 525.
Copyright 2007, Metropolitan News Company