Bank of America, American Express Hit with Class Actions Over Allegedly Illegal Interest Rate Charges

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Two proposed class action lawsuits claim Bank of America and American Express have since March 2022 unlawfully imposed excessive interest rates on cardholders.

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The lawsuits say that in direct violation of the federal Truth in Lending Act (TILA) and its 2009 amendment, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, the two banks have repeatedly raised credit card interest rates without providing consumers 45 days’ notice and retroactively applied the increased rates to cardholders’ existing balances.

According to the suits, the CARD Act amendments preclude credit card companies such as Bank of America and American Express from raising interest rates without advanced notice and only allow rate increases to be applied to future transactions rather than to consumers’ existing, or “protected,” balances.

However, the cases explain, a limited “variable rate” exception to the CARD Act allows credit card companies to raise interest rates in accordance with a publicly available, third-party published index outside the control of the creditor. Per the suits, the defendants use the prime rate index for this purpose.

In this case, the banks’ respective fixed interest rate is combined with the prime rate to calculate a total variable annual percentage rate of interest, the complaints relay.

Importantly, the prime rate—which the defendants use to directly calculate the interest rates cardholders are charged—has “more than doubled since March 2022 and is now at 8.25%, the highest in more than a decade,” the filings share.

The lawsuits argue that since March 2022, the banks have used the rising prime rate as an excuse to illegally assess hefty interest rates on credit cards.

“These unlawful interest rate increases have generated untold millions for Bank of America,” one suit contends, “which has so far imposed ten interest rate increases on its cardholders over the period.”

In addition, the cases allege that since March 2022 the banks have recalculated daily interest rates before the prime rate has even risen and applied the higher rates to cardholders’ protected balances, in direct violation of the TILA.

“In other words, rather than raise its rates ‘according to operation of an index,’ American Express retroactively imposes its own proprietary operation for interest rate increases upon a cardholder balance for the entire billing period, even imposing daily interest charges on days when the new rate did not yet exist,” one complaint claims.

The filings stress that, as a result, millions of cardholders have been wrongfully charged excessive interest rates on transactions to which the increases were improperly applied.

The lawsuits look to respectively represent any Bank of America or American Express consumer credit cardmember who has carried a card balance from at least one billing period to another since March 2022 on a variable rate credit card.

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