Strubel v. Capital One Bank (USA), N.A.

179 F.Supp.3d 320

Abigail Strubel, Plaintiff,

v.Capital One Bank (USA), N.A., Defendant.

14-cv-5998 (AJN)

United States District Court, S.D. New York.

Signed March 29, 2016

Brian Lewis Bromberg, Jonathan Robert Miller, Bromberg Law Office, P.C., Harley Jay Schnall, Law Office of Harley J. Schnall, New York, NY, for Plaintiff.

Seth A. Schaeffer, Bryan A. Fratkin, McGuireWoods, LLP, Richmond, VA, Jeffrey James Chapman, McGuireWoods LLP, New York, NY, for Defendant.

MEMORANDUM & ORDER

ALISON J. NATHAN, District Judge:

Plaintiff Abigail Strubel brings this putative class action against Capital One Bank (USA), N.A. (“Capital One”) for violating the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”). Strubel alleges that Capital One sent her a credit card solicitation accompanied by disclosures that failed to comply with TILA and with its implementing regulation, 12 C.F.R. Pt. 1026 (“Regulation Z”). Both parties moved for summary judgment. For the reasons set forth below, Strubel's motion is DENIED, and Capital One's motion is GRANTED.

I. Background

A. Statutory and Regulatory Context

Congress passed TILA in 1968 to ensure “a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601(a). To achieve these goals, TILA contains a variety of mandatory disclosures that creditors must make to consumers both prior to the establishment of any legal obligations, and at specified points in the creditor-consumer relationship. Rossman v. Fleet Bank (R.I.) Nat'l Ass'n , 280 F.3d 384, 389 (3d Cir.2002). The Act grants rulemaking authority to the Consumer Financial Protection Bureau (“CFPB”). 15 U.S.C. § 1604(a). Prior to 2011, TILA's rulemaking authority was delegated to the Board of Governors of the Federal Reserve (“the Board”). Strubel v. Comenity Bank, No. 13–cv–4462, 2015 WL 321859, at *3 (S.D.N.Y. Jan. 23, 2015) ; 12 U.S.C. §§ 5581 -82. Regulation under TILA “may contain such additional requirements ... as in the judgment of the [CFPB] are necessary or proper to effectuate the purposes of [TILA], to prevent circumvention or evasion thereof, or to facilitate compliance therewith.” 15 U.S.C. § 1604(a). All required disclosures under TILA must be made “clearly and conspicuously, in accordance with regulations of the [CFPB].” Id. § 1632(a).

The Fair Credit and Charge Card Disclosure Act of 1988, Pub. L. No. 100–583, 102 Stat. 2960, added a requirement that credit card issuers provide standardized information relating to interest rates and fees on credit card applications and solicitations. 15 U.S.C. § 1637(c). These disclosures must be made in a tabular format known as the “Schumer Box,” after its chief proponent, Senator Charles Schumer. Roberts v. Fleet Bank (R.I.), 342 F.3d 260, 263 n. 1 (3d Cir.2003). The Schumer Box disclosures must be “disclosed in the form and manner which the Board shall prescribe by regulations.” 15 U.S.C. § 1632(c)(1)(A) ; see also id. § 1637(c)(1)(A). TILA contains a private right of action that provides statutory damages for violations of many disclosure obligations, including those related to the Schumer Box. Id. § 1640(a).

The Board's (now the CFPB's) Regulation Z implements TILA's disclosure requirements, including credit card solicitation disclosures. See generally 12 C.F.R. § 1026.60. It specifies the disclosures that must be placed in the Schumer Box's tabular format, as well as three disclosures that must be placed directly beneath the box. Id. The annual percentage rate, which must be disclosed in the Schumer Box, must be in at least 16-point type. Id. § 1026.60(b)(1). Regulation Z also requires that credit card disclosures be made “clearly and conspicuously.” Id. § 1026.5(a)(1)(i). In an appendix, the CFPB provides a model form for Schumer Box disclosures (Form G-10(A)), as well as two sample forms (G-10(B) and G-10(C)) (collectively “model forms”). Regulation Z requires that the Schumer Box disclosures have “headings, content, and format substantially similar” to the G-10 model forms in Appendix G. Id. § 1026.60(a)(2)(i).

The Board created (and the CFPB in relevant part adopted) Official Staff Commentary (“Commentary”) elaborating on Regulation Z. The Commentary interprets the “clear and conspicuous” standard present in both TILA and Regulation Z. For most disclosures, the Commentary interprets “clear and conspicuous” to require that the information be presented “in a reasonably understandable form.” 12 C.F.R. Pt. 1026, Supp. I cmt. (“Comment”) 5(a)(1)-1; Comment 17(a)(1)-1. In the case of disclosures accompanying credit card solicitations, however, the Commentary interprets the standard as requiring something more stringent: that disclosures be both “in a reasonably understandable form” and “readily noticeable to the consumer.” Comment 5(a)(1)-1. The “reasonably understandable form” standard “does not require that disclosures be segregated from other material or located in any particular place on the disclosure statement, or that numerical amounts or percentages be in any particular type size.” Comment 5(a)(1)-2. However, the “readily noticeable” standard requires that disclosures “be given in a minimum of 10-point font.” Comment 5(a)(1)-3.

The Commentary states that while use of model forms and clauses grants a safe harbor from liability, solicitation disclosures need not be identical to the model forms. Comment apps. G & H-1. However, the Commentary requires (paraphrasing Regulation Z) that any creditor choosing to eschew Form G-10(A) must provide disclosures “substantially similar in sequence and format” to the model forms. Comment app. G-5.ii. The Commentary notes that although the model forms are designed to be printed on an 8½ x 14 inch sheet of paper, “creditors are not required to use a certain paper size” in making these disclosures. Comment app. G-5.v. Finally, the Commentary details at some length the formatting techniques used by the CFPB to ensure that its model forms are “readable:”

A. A readable font style and font size (10-point Arial font style, except for the purchase annual percentage rate which is shown in 16-point type).

B. Sufficient spacing between lines of the text.

C. Adequate spacing between paragraphs when several pieces of information were included in the same row of the table, as appropriate....

D. Standard spacing between words and characters. In other words, the text was not compressed to appear smaller than 10-point type.

E. Sufficient white space around the text of the information in each row, by providing sufficient margins above, below and to the sides of the text.

F. Sufficient contrast between the text and the background. Generally, black text was used on white paper.

Id. The Commentary explains that while creditors are not required to follow the same formatting used in the creation of the model forms (“except for the 10-point and 16-point font requirement”), the CFPB “encourages issuers to consider these techniques when deciding how to disclose information in the table, to ensure that the information is presented in a readable format.” Comment app. G-5.vi.

B. Factual and Procedural Background

Plaintiff Abigail Strubel received an application for a CapitalOne VentureOne card by mail in August 2013. Def.'s Response to Pl.'s Rule 56.1 Statement (“Def.'s 56.1 Resp.”) ¶ 1. She applied for the card, was approved, and made a purchase with it. Def.'s 56.1 Resp. ¶¶ 4-6.

The application Strubel received from Capital One included a one-page sheet of disclosures (the “Disclosures”). Pl.'s Response to Def.'s Rule 56.1 Statement (“Pl.'s 56.1 Resp.”) ¶ 8; see Schaeffer Decl. Ex. A. The Disclosures consisted of the Schumer Box, TILA-mandated disclosures required to sit beneath the Schumer Box, and twenty-eight lines of additional disclosures that Capital One chose to add below them. Def.'s 56.1 Resp. ¶ 37; Pl.'s 56.1 Resp. ¶¶ 8-9; see Schaeffer Decl. Ex. A. The Disclosures were printed in a font called ITC Garamond Light Condensed BT (“Garamond LC”) in 10-and 16-point type. Pl.'s 56.1 Resp. ¶¶ 10-11. In formatting the Disclosures, Capital One used techniques called “leading” and “tracking” to reduce the whitespace between letters, words, and lines of text. PL's 56.1 Resp. ¶¶ 13-14.

On July 31, 2014, Strubel filed this putative class action alleging that the Disclosures violate TILA because they are not “clear and conspicuous,” and do not comply with formatting requirements imposed by Regulation Z. Dkt. No. 1. On November 24, 2015, the Court entered a case management plan bifurcating the issue of liability from the issues of damages and class certification. Dkt. No. 15. The parties filed cross-motions for summary judgment on the issue of liability, and the Court turns to them now.

II. Request for Stay

As an initial matter, Capital One asks the Court not to decide the motions currently pending before it in this case until the Supreme Court issues a decision in Spokeo, Inc. v. Robins, No. 13–1339. Def.'s S.J. Br. at 19-21. The Supreme Court granted certiorari in Spokeo to decide whether Congress can confer Article III standing on a plaintiff who has suffered no concrete harm by authorizing a private right of action based on a violation of a federal statute. The only injury Strubel mentions in her complaint is a violation of her statutory right to disclosure under TILA. Compl. ¶ 40. If the Supreme Court were to rule in Spokeo that statutory rights cannot confer Article III standing, this Court would likely determine that Strubel lacks standing to pursue her claim.

Although Capital One does not argue that Strubel lacks standing under current law, lack of standing is a defect in subject matter jurisdiction. All. For Envtl. Renewal, Inc. v. Pyramid Crossgates Co. , 436 F.3d 82, 85 (2d Cir.2006). Federal courts must determine whether subject matter...