Schwartz v. HSBC Bank USA, N.A.
OPINION & ORDER re: 14 MOTION to Dismiss AMENDED COMPLAINT filed by HSBC Bank USA, N.A., 7 MOTION to Dismiss the Complaint filed by HSBC Bank USA, N.A. For the foregoing reasons, HSBC's motion to dismiss is granted. The Clerk of Court is directed to terminate the motions at docket numbers 7 and 14, and to close this case. (Signed by Judge Paul A. Engelmayer on 10/18/2013) (lmb)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BRUCE SCHWARTZ et al.,
HSBC BANK USA, N.A.,
13 Civ. 769 (PAE)
OPINION & ORDER
PAUL A. ENGELMAYER, District Judge:
Plaintiff Bruce Schwartz (“Schwartz”) brings this putative class action against defendant
HSBC Bank USA, N.A. (“HSBC” or “defendant”), alleging that certain practices of and
disclosures by HSBC in connection with its credit card billing practices violated the Truth in
Lending Act (“TILA” or “the Act”), 15 U.S.C. §§ 1601 et seq. In particular, Schwartz alleges
that, on the monthly billing statements it sent him, HSBC inaccurately or incompletely disclosed
the annual interest rate and the “balance subject to interest.” Schwartz also claims HSBC
improperly charged late fees and interest on payments he submitted by mail during one billing
HSBC moves to dismiss the Amended Complaint, under Federal Rule of Civil Procedure
12(b)(6), for failure to state a claim, or, alternatively, to strike certain class allegations pursuant
to Federal Rule of Civil Procedure 23(d)(1)(D). For the reasons that follow, the Court grants
HSBC’s motion to dismiss.
In or about November 2011, Schwartz opened a credit card account with HSBC, a
corporation with principal operations in New York City. Am. Compl. ¶¶ 9, 11; Schwartz Br. 1.
Schwartz claims that HSBC made improper disclosures in three monthly billing statements on
this account: those with closing dates of January 3, 2012 (the “January Statement”) (Am.
Compl. Ex. A), February 3, 2012 (the “February Statement”) (id. at Ex. B), and March 2, 2012
(the “March Statement”) (id. at Ex. C). Id. ¶¶ 44–50. Schwartz also claims that HSBC
improperly charged him a late fee (later reversed) on a payment he made during the billing
period that closed October 3, 2012 (the “October Statement”) (id. at Ex. D), whereas in fact his
payments had complied with the bank’s stated policy. Id. ¶¶ 15–15. 2 The Court describes each
claim in turn.
Failure to Properly Disclose Whether APR Was Variable or Fixed
The second page of each of Schwartz’s monthly statements contained a chart entitled
“Interest Charge Calculation.” Running vertically, the chart listed, under “Type of Balance,” the
three lines of credit available to Schwartz on his HSBC Platinum MasterCard: Cash Advances,
The facts related herein are drawn from the Amended Complaint (“Am. Compl.”), Dkt. 13. For
the purpose of deciding HSBC’s motion to dismiss, the Court accepts as true the facts alleged by
Schwartz and draws all reasonable inferences in Schwartz’s favor. See, e.g., Galiano v. Fidelity
Nat’l Title Ins. Co., 684 F.3d 309, 311 (2d Cir. 2012); Holmes v. Grubman, 568 F.3d 329, 335
(2d Cir. 2009); Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002).
The Amended Complaint contains incorrectly numbered paragraphs on pages 4 and 5, with
paragraphs numbered as 15, 16, 15, and 17.
Purchases, and Balance Transfers. See Am. Compl. Ex. A–C.3 Running horizontally, the chart
presented, for each type of balance, the (1) “Annual Percentage Rate (APR)” applicable to that
balance, (2) the “Balance Subject to Interest Rate,” and (3) the “Interest Charge.” Id. Just above
the chart, the statement stated: “Your Annual Percentage Rate (APR) is the annual interest rate
on your account.” Id. (boldface type omitted). Each chart set forth, under the APR header, the
APR applicable to the line of credit in question. In each case, Cash Advances were subject to a
21.99% interest rate, whereas Purchases and Balance Transfers were subject to a 0.00% interest
rate. Id. Immediately following those stated interest rates, each statement noted whether each
APR was variable, i.e., whether the rate was subject to adjustment by the bank. It did so, where
this was the case, by following the rate with a “(v).” An explanatory footnote, located at the
bottom of the chart, stated, “v=Variable Rate.” Id.
The charts presented inconsistent information as to which APR rates were variable. The
February Statement stated that all three APRs were variable rates. Am. Compl. ¶ 45, Ex. B.
However, the March Statement stated that only the Cash Advances APR was a variable rate. Id.
¶ 46, Ex. C. Schwartz argues that, because the terms of his agreement with HSBC “did not call
for any modification” of the APR between the February and March statements, the February and
March statements “contradict one another” and that one of them therefore must violate 15 U.S.C.
§ 1637(b)(5), which requires disclosure of the periodic rate, the balance to which it is applied,
and the corresponding nominal APR. Id. ¶ 47. Schwartz also alleges that this disclosure violated
12 C.F.R. § 1026.5(c) and § 226.5(c), which require that disclosures reflect the “legal obligations
between the parties.” Id. Schwartz further asserts that, if the APR for Purchases and Balance
The monthly statements in question were attached to the Amended Complaint. On a motion to
dismiss, the court may consider “any written statement attached to [the complaint] as an exhibit
or any statements or documents incorporated in it by reference.” Chambers, 282 F.3d at 153.
Transfers was indeed variable, as the February Statement stated, the March Statement violated
12 C.F.R. § 1026.7(b)(4)(i) and § 226.7(b)(4)(i), which mandate disclosure that such rates “may
vary.” Id. ¶ 48.
Schwartz does not claim that HSBC actually charged him an incorrect APR on any of his
statements. Rather, Schwartz acknowledges that he was billed consistent with his card member
agreement, which provided for a 12-month “introductory APR” of 0.00% for Purchases and
Balance Transfers and a 21.99% variable APR for Cash Advances. Schwartz instead claims that
the incorrect disclosure was a technical, but actionable, violation of TILA.
Failure to Properly Disclose Balance Subject to Interest Rate
Schwartz also claims that the February and March statements did not properly disclose
the “balance subject to interest rate.” In a chart entitled, “Summary of Account Activity,” the
February Statement stated that the “new balance” on Schwartz’s account as of February 3, 2012
was $528.70 (which was calculated by taking the $673.40 balance due as of January 3, 2012,
subtracting $150 in payments Schwartz had made during the period covered by the February
statement, and adding $5.30 in interest charged). See Am. Compl. Ex. B. Of this, the February
Statement listed $284.02 as the “balance subject to interest” for Cash Advances; for Purchases
and Balance Transfer, it listed a zero “balance subject to interest.” See id. ¶ 49, Ex. B. The
March Statement stated that the “new balance” on Schwartz’s account as of March 2, 2012 was
$431.81 (which was calculated by taking the $528.70 balance due as of February 3, 2012,
subtracting $100 in payments and $25 in “[o]ther [c]redits,” and adding $25 in a fee for a latecharge assessment and $3.11 in interest charged). See id. Ex. C. Of this, the March Statement
listed $184.65 as the “balance subject to interest” for Cash Advances; for Purchases and Balance
Transfers, it again listed a zero “balance subject to interest.” Id. ¶ 50, Ex. C.
As to the March Statement, Schwartz argues that, because he had not paid his outstanding
balance, it was incorrect to report as zero the amount of his Purchases subject to interest. He
does not concretely explain what the specific number should be, but maintains it should have
been a positive number. In other words, he alleges, although his outstanding balances in the
categories of both Purchases and Balance Transfers were subject to a 0.00% interest rate, and
therefore HSBC was correct to calculate that no interest was due, as a technical matter, an
interest rate was still being applied to his positive balance, and it was inaccurate to state that the
balance was zero. In so stating, Schwartz alleges, HSBC violated TILA, specifically 15 U.S.C.
§ 1637(b)(5) 4 and 12 C.F.R. § 1026.5(b)(5) and § 226.5(b)(5). See id. ¶¶ 49–50. Again,
Schwartz does not claim HSBC charged him an incorrect rate, just that the statements
“erroneously disclosed” his balances. Id.
Improperly Charging a Late Fee for a Mailed Payment
Finally, Schwartz alleges that HSBC improperly charged him a late fee for a monthly
payment that, he states, conformed to HSBC’s stated payment policies. After the October
Statement, Schwartz owed a $25 minimum payment toward his outstanding balance of $119.46;
the $25 minimum payment was due October 28, 2012. See Am Compl. Ex D. Because October
28, 2012 was a Sunday, the bank was not receiving payments by mail that day. Id. ¶¶ 15, 19.
Schwartz made two payments towards his outstanding balance. First, in the days before the due
date, he mailed a $25 check with a payment coupon in a bank-specified envelope to meet the
minimum charge; he alleges that this payment conformed to “the requirements in the Payment
The Amended Complaint alleges this disclosure violates § 1637(b)(5), which requires that
creditors disclose each periodic rate, the balance to which it is applied, and the corresponding
nominal APR. In his brief opposing dismissal, Schwartz alleges the same behavior is instead a
violation of § 1637(b)(7), which requires that creditors disclose the balance “on which the
finance charge was computed.”
Instructions.” Id. ¶ 15. 5 Around the same time, Schwartz states, he made another payment of
$50, accompanied by its own payment coupon, sent in another bank-specified envelope; he
alleges that this payment also conformed to HSBC’s requirements. Id. ¶ 17. HSBC, however,
charged Schwartz a $19 late fee, which is reported on the next (November) statement as having
been assessed on October 28, 2012. On the November statement, HSBC reported $75 in total
payments as having been received on Monday, October 29, 2012. Id. ¶ 18, Ex. E.
In its monthly statements, HSBC included the following payment instructions:
Payments should be mailed with a single payment coupon to the payment address
shown on the front of this billing statement. Payments must be made by a single
check or money order payable in U.S. dollars and drawn on a U.S. Institution . . .
Payments received on any day at the payment address shown on the front by 5:00
p.m., in that payment address time zone, will be credited to your Account as of
the date of receipt. . . . All payments received after 5:00 p.m. of the time zone
indicated will be credited the next day. Crediting payments to your Account may
be delayed up to five days if the payment is not made as described above, or, is
not mailed to and received at the address provided for remittance; is not
accompanied by the payment coupon; is received in an envelope other than the
envelope provided for remittance; is not accompanied by the payment coupon; is
stapled, folded, or paper clipped; or includes multiple payment coupons or checks.
Id. ¶ 16.
Schwartz argues that because HSBC was not receiving or accepting payments by mail on
the Sunday, October 28, 2012 due date, it was required by law to accept his payment the
following day and to treat it as timely. Id. ¶¶ 52–53. Schwartz notes that 15 U.S.C. § 1637(o)(2)
requires financial institutions to extend due dates by one business day when they fall on a
Sunday or holiday. Positing that HSBC imposed the late fee based on its having treated
payments that were received on October 29, 2012, as late, Schwartz alleges that this charge
violated TILA. He also alleges that the bank violated TILA when it failed to notify Schwartz,
The second ¶ 15. See supra, note 2.
within the statutory time period of 60 days, that the late fee had been charged in error. Id. ¶ 54;
see 15 U.S.C. §§ 1637(o)(2), 1640(b).
Although Schwartz requests actual damages for the improper late fee in his filings, his
counsel, at argument, acknowledged that Schwartz suffered no actual damages. Questioned by
the Court, Schwartz’s counsel stated that: “HSBC, because of super storm Sandy, actually
credited Mr. Schwartz an amount in the amount of the late fee. . . . There are no actual damages
that we can ascertain.” See 9/11/13 Oral Argument Transcript (“Tr.”) 37–38. Schwartz’s
counsel argued that Schwartz was nevertheless eligible for statutory damages. Id.
With respect to each allegation of a violation of TILA, Schwartz alleges that there are
other cardholders who experienced the same conduct. He seeks statutory damages on behalf of
himself and the putative class, together with costs and reasonable attorneys’ fees.
On February 1, 2013, Schwartz filed suit against HSBC, claiming the bank’s failures to
disclose required information and an improper late fee violated TILA’s regulations. Dkt. 1. On
April 26, 2013, HSBC filed a motion to dismiss, Dkt. 7, a supporting memorandum of law, Dkt.
12, and the accompanying Declaration of Scott Maciejewski (“Maciejewski Decl.”), Dkt. 9.
On May 17, 2013, Schwartz filed the Amended Complaint and accompanying exhibits.
Dkt. 13. On June 7, 2013, HSBC filed a motion to dismiss the Amended Complaint, Dkt. 14,
and a supporting memorandum of law (“HSBC Br.”), Dkt. 15. On June 21, 2013, Schwartz filed
an opposing brief (“Schwartz Br.”). Dkt. 16. On July 3, 2013, HSBC filed a reply (“HSBC
Reply Br.”). Dkt. 18. On Sept. 11, 2013, the Court heard argument on the motion to dismiss.
Applicable Legal Standard
To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). A claim will only have “facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint is properly
dismissed, where, as a matter of law, “the allegations in a complaint, however true, could not
raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. Accordingly, a district court
must accept as true all well-pleaded factual allegations in the complaint, and draw all inferences
in the plaintiff’s favor. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.
2007). However, that tenet “is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. Thus,
a pleading that offers only “labels and conclusions” or “a formulaic recitation of the elements of
a cause of action will not do.” Twombly, 550 U.S. at 555.
Enacted in 1969, TILA was designed to promote informed use of credit, through fair and
transparent lending practices. See 15 U.S.C. § 1601(a); Chase Bank USA, N.A. v. McCoy, 131 S.
Ct. 871, 874 (2011). Rather than regulate the substantive terms on which creditors can offer or
manage a financial product, TILA primarily requires “meaningful disclosure.” See Ford Motor
Credit Co. v. Milhollin, 444 U.S. 555 (1980); Gambardella v. G. Fox & Co., 716 F.2d 104, 110
(2d Cir. 1983). TILA regulates disclosures by a creditor to a consumer throughout their financial
relationship: during solicitation and application; at signing; during each billing cycle; and at
renewal. See 15 U.S.C. § 1637(a)–(d).
Relevant here, creditors must disclose, among other things, “[t]he conditions under which
a finance charge may be imposed,” “[t]he method of determining the amount of the finance
charge,” and, “[w]here one or more periodic rates may be used to compute the finance charge,
each such rate . . . and the corresponding nominal annual percentage rate.” Id. § 1637(a)(1),
(a)(3) & (a)(4). The disclosure of the Annual Percentage Rate, or APR, provides “a typical, and
therefore useful, comparative measure of the price of the credit the company sells to the
consumer,” consistent with TILA’s goal of informing consumers. Barrer v. Chase Bank USA,
566 F.3d 883, 887 (9th Cir. 2009); see 15 U.S.C. §§ 1605(a) & 1606(a)(2). 6 TILA “is to be
construed liberally” in favor of the consumer. See Schnall v. Marine Midland Bank, 225 F.3d
263, 267 (2d Cir. 2000); N.C. Freed Co. v. Board of Governors of the Fed. Reserve Sys., 473
F.2d 1210, 1214 (2d Cir. 1973).
For the reasons that follow, Schwartz’s three allegations of TILA violations fail to state a
claim. First, HSBC’s two alleged disclosure lapses (with regard to the variable rate and the
balance subject to interest), which Schwartz concedes did not cause actual damages, are not ones
for which statutory damages are available. Second, these two alleged lapses are hypertechnical
defects that, under Second Circuit case law, do not supply a basis on which a plaintiff can
recover. Finally, Schwartz’s third claim of an improper late fee charge fails because, as
Schwartz concedes, HSBC later reversed the late fee. Schwartz therefore suffered no actual
damages, and the provision under which TILA brings that claim is not one that triggers statutory
Authority to “prescribe regulations to carry out the purposes” of the Act is now vested in the
Consumer Financial Protection Board. 15 U.S.C. § 1604. These implementing regulations are
known as Regulation Z. See 12 C.F.R. §§ 226 et seq.
A. Schwartz’s Disclosure Allegations Fail to State a Claim.
Schwartz admits that HSBC’s alleged disclosure lapses caused him no actual damages,
because (1) notwithstanding the inconsistent statements on his monthly statements about whether
a variable rate applied, HSBC billed him in accord with his introductory cardmember agreement;
and (2) notwithstanding HSBC’s alleged error in listing certain balances as subject to interest,
the interest rate to which HSBC reported he was subject was 0.00%, which resulted in an
accurate calculation that he owed no interest on the stated sums. He argues instead that he is
eligible for an award of statutory damages. However, a creditor is liable for statutory damages
for a failure to comply only with designated provisions of TILA. See 15 U.S.C. § 1640(a).
Schwartz claims the disclosure deficiencies—the (1) contradictory disclosure of the APR and (2)
the incomplete disclosure of his “balance subject to interest”—are among those for which such
damages are authorized.
Schwartz is correct that violations of disclosure obligations under paragraph (4) through
(13) of 15 U.S.C. § 1637(b) can trigger a statutory award. Id. § 1640(a)(4). Here, Schwartz
claims that HSBC’s disclosures violated paragraphs (b)(5) and (b)(7). 7 But even accepting as
true the facts Schwartz pleads, the disclosures on his monthly billing statements did not violate
either of those subsections.
Paragraph (b)(5) requires the creditor on open-ended credit plans—which the parties
agree Schwartz had— to transmit specific information at the close of each billing cycle. This
Where one or more periodic rates may be used to compute the finance charge,
each such rate, the range of balances to which it is applicable, and . . . the
The Court treats arguendo Schwartz’s claim of a violation of § 1637(b)(7) as within the scope
of his pleadings. In fact, the Amended Complaint does not allege any such violation. Schwartz
first made this claim in his brief in opposition to the motion to dismiss. See Schwartz Br. 3, 10.
corresponding nominal annual percentage rate determined by multiplying the
periodic rate by the number of periods in a year.
Id. § 1637(b)(5).
Schwartz argues that the inconsistency between his February and March Statements—in
which one statement stated that his periodic rates were variable (“v”) and the other did not—
means the rates were inaccurately disclosed, in violation of § 1637(b)(5). But Schwartz misreads
that provision. It does not require disclosure of the variable or fixed status of a periodic rate. It
merely requires the accurate disclosure of the applicable rate, the balance to which it is applied,
and the nominal APR. Despite the contradictory statements as to whether Schwartz’s periodic
rates were or were not variable, Schwartz does not allege that his statements lacked, or misstated,
any of these required disclosures.
Schwartz’s second theory of wrong suffers from a similar flaw. Schwartz alleges that
HSBC’s failure to list, as a positive number rather than zero, his existing Purchases “balance
subject to interest” violated paragraph (b)(7), which requires a creditor to disclose “[t]he balance
on which the finance charge was computed and a statement of how the balance was determined.”
15 U.S.C. § 1637(b)(7). But in Schwartz’s case, no finance charge was computed for his
outstanding Purchases balance, which was subject to 0.00% interest during this period.
Therefore, there was no required disclosure under paragraph (b)(7). And the only balance for
which a finance charge was computed—Cash Advances at 21.99% interest—was listed correctly.
Schwartz’s total balance and interest costs were both accurately listed on the first page of each of
his monthly statements.
Schwartz alternatively argues that the two faulty disclosures violated implementing
Regulation Z. See supra p. 9 n.6. He argues that the contradictory disclosures on the February
and March Statements as to whether the APR for his Purchases and his Balance Transfers was
subject to a variable interest rate violates 12 C.F.R. §§ 1026.7(b)(4)(i) and 226.7(b)(4)(i), which
require disclosure “[f]or variable-rate plans . . . that the annual percentage may vary”, and 12
C.F.R. § 1026.5(c) or § 226.5(c), which state generally that “[d]isclosures shall reflect the terms
of the legal obligation between the parties.” And, he argues, the failure to list as a positive
number his “balance subject to interest” violates 12 C.F.R. §§ 1026.7(b)(5) and 226.7(b)(5),
which require disclosure of “the balance to which a periodic rate was applied . . . and an
explanation of how that balance was determined, using the term Balance Subject to Interest
Rate.” Schwartz admits that violations of Regulation Z do not themselves support an award of
statutory damages, but argues that they may do so here because they “implement” TILA. See
Schwartz Br. 17.
This argument is unpersuasive. It is well settled that statutory damages are not available
for violations of Regulation Z. See Kelen v. World Fin. Network Nat. Bank, 763 F. Supp. 2d 391,
393 (S.D.N.Y. 2011) (citing Brown v. Payday Check Advance, Inc., 202 F.3d 987, 991 (7th Cir.
2000)); see also Litwin v. Chase Bank USA, N.A., No. 10 Civ. 9609 (JSR), 2011 WL 2017667, at
*4 (May 16, 2011); Turk v. Chase Manhattan Bank USA, N.A., No. 00 Civ. 1573 (CM)(GAY),
2001 WL 736814, at *2 (S.D.N.Y. June 11, 2001). And the notion that statutory damages can be
imposed on the theory that Regulation Z “implements” TILA, where TILA itself has not been
violated, has been rejected by courts in this district. In Kelen, for example, Judge Hellerstein
explained that “to read [a particular] Regulation Z requirement into [TILA] and to allow the
recovery of statutory damages for a violation thereof, would be to flaunt congressional intent.”
763 F. Supp. 2d at 394.
It is no answer for Schwartz to observe that Regulation Z contains “similar … language”
to the TILA provisions at issue. See Schwartz Br. 17. That is, unsurprisingly, often the nature of
an implementing regulation. But the statute’s plain language limits the avenues for recovery of
statutory damages; to permit an award of statutory damages based on an implementing regulation
that tracks a statutory provision that does not provide for statutory damages would, as Kelen
observed, flout Congress’s intent. Put differently, having failed to show that HSBC’s alleged
disclosure lapses violated TILA, Schwartz cannot obtain statutory damages through the back
door by relying instead on similarly worded implementing regulations.
Schwartz also may not recover because he fails to adequately allege that HSBC’s
disclosures violated TILA. His first allegation, as noted, is that either the February or March
Statement improperly denoted whether the APR was variable. But this claim founders, because
Schwartz was subject to a promotional rate. Under TILA, there is an exception for promotional
rates, which must be disclosed only when actually applied. See 12 C.F.R. § 1026.7(b)(4)(ii). A
promotional rate is defined as follows:
(i) Promotional rate means any annual percentage rate applicable to one or more
balances or transactions on an open-end (not home-secured) plan for a specified
period of time that is lower than the annual percentage rate that will be in effect at
the end of that period on such balances or transactions.
(ii) Introductory rate means a promotional rate offered in connection with the
opening of an account.
12 C.F.R. § 1026.16(g)(2)(i),(ii). This definition disposes of Schwartz’s claim, because in neither
February nor March was any rate other than 0% interest applied to Schwartz’s balance, and this
rate was accurately disclosed.
Schwartz counters that the promotional rate exception does not apply because his rate
was introductory, not promotional. Schwartz Br. 6–7. In the alternative, even if the variable rate
was promotional, he argues, it was “actually applied.” Neither argument is convincing. By its
terms, the definition of a promotional rate explicitly encompasses introductory rates. 12 C.F.R.
§ 1026.16(g)(2)(ii) (“Introductory rate means a promotional rate offered in connection with the
opening of an account.”). Thus, even if Schwartz’s temporary 0.00% APR is fairly classified as
an introductory rate, it is still exempt except to the extent actually applied. And Schwartz’s
claim that the promotional rate was “actually applied” is not plausible. The statement reports
that a 0.00% rate was applied to his existing balances. Schwartz does not explain what is
inaccurate about that statement.
Schwartz’s second allegation, as noted, is that his statements incorrectly reported a
balance of zero as his “balance subject to interest.” But TILA mandates the disclosure of
outstanding balances “to which a finance charge was imposed.” 15 U.S.C. § 1637(b) (emphasis
added). As the Amended Complaint and the attached monthly statements reflect, HSBC treated
Schwartz’s outstanding Purchases balance as subject to a 0.00% APR, and as a result, no finance
charge was imposed on the balance. It is thus exempt from the disclosure. Notably, the Cash
Advances balance, as to which a finance charge was imposed, was properly listed, and Schwartz
does not challenge that disclosure. See Am. Compl. Ex. B, C. 8
As a final basis for its finding that Schwartz’s two disclosure claims fail to state a claim,
the Court notes that Schwartz alleges only hypertechnical deficiencies. To be sure, at least one
court of appeals has held that TILA requires “absolute compliance by creditors . . . and even
technical or minor violations of the TILA impose liability on the creditor.” See Rubio v. Capital
One Bank, 613 F.3d 1195, 1199 (9th Cir. 2010) (citation omitted). But in its application of TILA
to such types of claims, the Second Circuit has taken a different approach, mostly declining to
extend liability to creditors for insignificant or technical violations. See, e.g., Schnall, 225 F.3d
at 268 (dismissing claim that nondisclosure of a particular rate violated TILA where customer
Because Schwartz does not state a claim as to the “balance subject to interest,” the Court has no
occasion to consider HSBC’s alternative argument that this claim is time-barred.
did not actually use the product at issue); Turner v. Gen. Motors Acceptance Corp., 180 F.3d
451, 457 (2d Cir. 1999) (recognizing that intent of TILA was to limit creditor liability to
“significant violations”); Gambardella v. G. Fox, 716 F.2d 104, 118 (2d Cir. 1983) (optional but
misleading disclosures, such as reverse side disclosures and failure to use dollar signs before
monetary amounts, did not violate TILA). Cf. Krenisky v. Rollins Protective Servs. Co., 728
F.2d 64, 67–68 (2d Cir. 1984) (declining to consider “whether departure from strict compliance
with the regulations would be permissible when a violation is both de minimis and of benefit to
District courts in this circuit have largely also dismissed purely technical claims. See
Karakus v. Wells Fargo Bank, No. 09–cv–4739 (ENV)(SMG), 2013 WL 1743846, at *10–11
(E.D.N.Y. Apr. 22, 2013) (holding lender’s technical violation of providing borrowers with one,
rather than two, copies of notice of right to cancel a loan was not an actionable violation, and
noting that “the Second Circuit appears to have rejected the ‘hypertechnicality’ standard”);
Kahraman v. Countrywide Home Loans, Inc., 886 F. Supp. 2d 114, 120 n.4, 122 n.6 (E.D.N.Y.
2012) (declining “to follow those other courts that have applied a strict liability standard to
TILA, such that even minor or technical violations impose rescission liability on the creditor” in
view of the fact that “the Second Circuit has refused to grant statutory damages under TILA for
technical inaccuracies unlikely to mislead consumers”) (citation omitted); Stein v. JPMC, 279 F.
Supp. 2d 286, 292 (S.D.N.Y. 2003) (holding that failure, inter alia, to disclose that the APR was
determined as of the date of the credit card application did not violate TILA); Hale v. MBNA
America Bank, N.A., No. 99 Civ. 8831(AGS), 2000 WL 1346812, at *6 (S.D.N.Y. Sept. 18,
2000) (treating balances as zero balances instead of negative balance “is a relatively insignificant
component of the balance calculation”).
The two disclosure deficiencies Schwartz alleges here are similarly hypertechnical and
inconsequential. Schwartz does not claim that either error—the alleged misdescription of rates
on either his February or March statement as variable as opposed to fixed, or the allegedly errant
identification of the balance to which a 0% interest rate was applied—affected the charges
applied to him or caused him actual confusion about his obligations as a borrower. He simply
points out that under the strictest reading of TILA, HSBC has failed to achieve “absolute
compliance.” See Schwartz Br. 12. But, as the Second Circuit has stated, even imperfect
disclosures can be “sufficient under the law,” Gambardella, 716 F.2d at 117, and the purpose of
TILA is not to mandate “perfect disclosure, but only disclosure which clearly reveals to
consumers the cost of credit.” Id. at 118. The Court declines to permit Schwartz to “misuse
TILA ‘as an instrument of harassment and oppression against the lending industry.’” Hale, 2000
WL 1346812, at *5 (quoting Griesz v. Household Bank, 8 F. Supp. 2d 1031, 1037 (N. D. Ill.
B. Schwartz Fails to Assert Relief for an Improper Late Fee.
Schwartz’s third claim—that HSBC wrongly imposed a $19 “late fee” for his October
2012 payments—is his most concrete.
Schwartz is quite correct that HSBC would not have been justified in treating a check that
arrived at HSBC (as Schwartz alleges his did) on a Sunday (October 28, 2012) as untimely
where HSBC was not receiving checks that day. See 15 U.S.C. § 1637(o)(2). HSBC, however,
seeks to justify the late fee charge on different grounds. It argues that Schwartz’s payments were
nonconforming, because Schwartz was obligated to make his October payment by means of a
single check, whereas Schwartz, in separate envelopes, sent HSBC “multiple payment coupons
or checks,” one of $25 and another of $50, both of which arrived on October 28, 2012. This
method of payment, HSBC argues, violated its payment instructions. See supra p. 6. And,
HSBC argues, under Regulation Z, it was entitled to specify reasonable requirements for
accepting and crediting nonconforming payments, including its policy of delaying the crediting
of nonconforming payments for five days. See 12 C.F.R. § 1026.10(b)(1) & (2) and
§ 226.10(b)(1) & (2); see also Trombley v. Bank of Am. Corp., 675 F. Supp. 2d 266, 272 (D.R.I.
2009) (“§ 226.10 expressly permits creditors to impose requirements for making payments and to
delay crediting nonconforming payments for up to five days.”). On this basis, HSBC argues, it
had no “enforceable obligation” to credit the nonconforming payment as having been received in
a timely manner. Absent that obligation, HSBC argues, Schwartz fails to state a claim.
Were that HSBC’s only argument for dismissal, the Court would sustain Schwartz’s
claim as plausible, and deny the motion to dismiss as to this episode. Schwartz alleges that he
sent a conforming payment—a $25 check payable to HSBC, in an envelope also containing the
payment coupon—and that that payment was timely received, on Monday, October 29, 2012.
Am. Compl. ¶ 15. And HSBC’s policy does not, at least explicitly, treat as nonconforming the
situation in which a cardmember sends it, in addition to such a conforming payment, another
envelope containing a second payment towards the same monthly balance. HSBC’s policy does
prohibit sending an envelope that includes “multiple payment coupons or checks.” But the
policy is silent as to the situation in which a cardmember, during a single month, sends it
multiple envelopes, each containing a separate payment; HSBC does not clearly state that such
conduct is non-compliant so as to subject the cardholder to a late fee. Therefore, whether the late
fee was imposed for the reason Schwartz postulates (because a Sunday payment was treated as
late), or the reason HSBC proffers (because payments were sent in multiple envelopes, in
ostensible violation of HSBC’s policy) the Amended Complaint plausibly alleges that HSBC
lacked a basis for imposing a late fee. On a motion to dismiss, it is not for the Court to engage in
factfinding as to the basis for HSBC’s imposition of the late fee or to rule in HSBC’s favor on
the basis of a policy whose application to the facts is unclear. Viewed in the light most favorable
to Schwartz, it is not evident on its face that his dual payments violated HSBC’s policy. His
claim therefore plausibly alleges a violation of 15 U.S.C. § 1637(o)(2).
However, to state a claim, Schwartz also must seek a remedy that he has not already
received. Although the Amended Complaint formally demands “[a]ctual damages and restitution
resulting from the Bank’s unlawful categorization of payments as late,” Am. Compl. at 14(6), at
argument, Schwartz’s counsel, acknowledged that Schwartz did not suffer any actual damages.
Tr. 37–38. The parties agree that HSBC, before the filing of this lawsuit, reversed the $19 late
fee and credited that amount to Schwartz “in a subsequent month . . . because of super storm
Sandy.” Id. at 37. Schwartz’s attorney argued that Schwartz is, nonetheless, eligible for
statutory damages. See id. at 38.
But 15 U.S.C. § 1637(o)(2), the TILA provision on which Schwartz bases this claim,
does not provide for statutory damages. 9 It is not among those subsections enumerated in
§ 1640(a), and “[c]ourts in this district have consistently disallowed statutory damages” for
violations not enumerated therein. Rubinstein v. Dep’t Stores Nat’l Bank, No. 12 Civ. 8054
(AJN), 2013 WL 3817767, at *2 (S.D.N.Y. July 22, 2013); see also Turk, 2001 WL 736814, at
*2 (no statutory damages for violation of section of the statute not enumerated in § 1640).
At argument, Schwartz’s attorney stated that the rationale for awarding statutory damages for
the late fee charges could be found in “[15 U.S.C. §] 1640(c) or (d)” which enumerate “other
violations  eligible for statutory damages.” Tr. 39. Neither of those subsections applies here.
Subsection (c) allows creditors a defense for “unintentional violations” or “bona fide errors.”
Subsection (d) limits recovery for transaction with “multiple obligors.”
Because there are no damages for Schwartz to recover on this claim, this claim, too, must
be dismissed. See Kelen, 763 F. Supp. 2d at 393-95.
For the foregoing reasons, HSBC's motion to dismiss is granted. The Clerk of Court is
directed to terminate the motions at docket numbers 7 and 14, and to close this case.
PwJ 4, f1d~
Paul A. Engelmayer
United States District Judge
Dated: October 18,2013
New York, New York
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