In Unanimous Decision, Supreme Court Rules That Card Fees Are Not Finance Charges

WASHINGTON – The Supreme Court ruled unanimously on April 21 that credit card issuers do not have to disclose over limit and other fees as part of their cards’ finance charges. The case pitted MBNA, a noted purchaser of credit union credit card portfolios which had inherited the case from a company it purchased, against Sharon Pfennig, a cardholder who maintained that because the fees are added to a cardholder’s balance they should be included as part of the finance charge disclosures under the Federal Reserve’s Regulation Z. But writing for the court, Supreme Court Justice Clarence Thomas noted that the Truth in Lending Act “does not make clear which charges fall into each category, [finance or fees] but its recognition of at least two categories establishes that Congress did not contemplate that all charges made in connection with an open-end credit plan would be considered finance charges. And where TILA explicitly addresses over-limit fees, it defines them as fees imposed in connection with an extension of credit rather than incident to an extension of credit.”