Bank of America
Under Federal law, a consumer who has a problem with the quality of goods or services purchased with a credit card, and has tried in good faith to correct the problem with the merchant, may withhold payment for the amount of the transaction until the dispute is settled. There are two limitations to this right: (1) the value of the goods or services must exceed $50, and (2) the transaction must have occurred in the consumers home state or within 100 miles of the consumer's residence if the transaction occurred out of state. Bank of America's cardholder agreements give consumers the same rights. Because withholding payment in this situation is permissible, a credit card company cannot report the withheld amount as delinquent to credit reporting agencies.
Plaintiff alleged that he was charged by Bank of America for services he did not receive. Plaintiff tried to resolve the problem with merchant and brought it to Bank of America's attention. Plaintiff withheld payment on the disputed amount as he is permitted to do. Notwithstanding the exercise of his rights under Federal law and the terms of his credit card agreement, Bank of America reported Plaintiff's account as delinquent to the credit reporting agencies.
Plaintiff requested an order preventing Bank of America from making reports to credit bureaus when a transaction is in dispute, preventing collections activity regarding disputed charges, and correcting reports for those consumers about whom Bank of America has issued derogatory credit reports under similar circumstances. The matter was ultimately settled in a manner favorable to Plaintiff. The District Court found that the settlement provided a substantial public benefit and ordered Bank of America to pay Plaintiffs' attorney's fees and cost.
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