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LIFSCHITZ v. AMERICAN EXPRESS CO.

March 18, 1983

JACK LIFSCHITZ, Individually and on behalf of all persons similarly situated
v.
AMERICAN EXPRESS COMPANY



The opinion of the court was delivered by: SHAPIRO

 NORMA L. SHAPIRO, J.

 Plaintiff, a cardholder of defendant American Express Company ("American Express"), instituted this action, individually and on behalf of a putative class, and alleged violation of the Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"). *fn1" The amended complaint seeks monetary and injunctive relief with respect to certain billing practices in connection with an American Express flight insurance plan. The plaintiff also asserts pendent claims under Pennsylvania law for fraud, conversion, breach of contract, and breach of fiduciary duty. American Express moved to dismiss the amended complaint for failure to state a claim for which relief can be granted. For the reasons set forth herein, the motion has been granted in part and denied in part.

 On a motion to dismiss under Fed.R.Civ.P. 12(b), all allegations of the complaint must be accepted as true. McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232, 62 L. Ed. 2d 441, 100 S. Ct. 502 (1980). Rule 12(b)(6), by its terms, limits us to a review of the statements in the complaint. Plaintiff alleged that American Express as the creditor of an open end credit plan issues a credit card, the American Express Card, for use in connection with the credit purchases of various goods and services, including tickets for airline travel. If an American Express cardholder uses his credit card to charge the purchase of an airline ticket, American Express provides him with a flight insurance policy in the amount of $75,000. This coverage, underwritten by Fireman's Fund America Life Insurance Co. ("Fireman's"), is always provided at no extra charge to the cardholder. However, if the cardholder is enrolled in American Express' Automatic Flight Insurance Plan (the "Plan"), upon charging an airline ticket for his use or the use of his spouse or dependent, the participating cardholder, his spouse or dependent is automatically provided with an additional $175,000 insurance coverage with respect to the purchased ticket. This coverage is also underwritten by Fireman's; however, each time a cardholder enrolled in the Plan uses his American Express Card to purchase an airline ticket, American Express charges his account three dollars ($3.00). Defendant's practice regarding this charge is complained of in this action.

 Plaintiff claims that when a cardholder enrolled in the Plan charges an airline ticket but subsequently cancels the ticket and returns it unused for credit, defendant credits the cardholder's account for the amount of the unused ticket but does not credit the three-dollar charge for the unused insurance. If a cardholder does not cancel but changes his ticket in any way that incurs an additional credit charge, defendant imposes a three-dollar charge in connection with the change. This charge is in addition to the original charge. Plaintiff further claims that American Express handles an ancillary arrangement made in connection with the purchase of an airline ticket, such as a hotel reservation or car rental, as a separate flight transaction and imposes an additional three-dollar charge for each such transaction; no additional flight insurance is obtained thereby. Finally, plaintiff complains that American Express imposes a three-dollar charge when a cardholder participating in the Plan uses the card to pay for an airline ticket for a passenger other than the cardholder (or spouse or dependent child) even though no insurance coverage is obtained thereby for such passenger.

 American Express does not disclose to cardholders this practice of imposing a three-dollar charge on all ancillary travel arrangements and on airline tickets for persons not obtaining flight insurance thereby. Moreover, plaintiff argues, American Express has refused to credit accounts for these charges despite numerous complaints made by cardholders. Plaintiff contends this conduct gives rise to two claims for violation of the TILA: under §§ 121 and 127, 15 U.S.C. §§ 1631, 1637, for failure to disclose these practices at the time a cardholder enrolls in the Plan; and under § 166, 15 U.S.C. § 1666e, for failure to credit cardholders' accounts with the insurance charge upon the return of unused airline tickets.

 The purpose of TILA is expressed in Section 102, 15 U.S.C.§ 1601:

 
The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this title to assure 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.

 Relying on this section of the TILA and its legislative history, defendant contends that the purpose of the Act is to enable a potential borrower to determine the true cost of credit *fn2" and plaintiff's claims are unrelated to the actual cost of credit. American Express contends that the allegations of the complaint at most establish an erroneous billing for unreceived services and, therefore, plaintiff's claims arise only under the "billing error" provisions of TILA (Part D), with which American Express claims it has complied.

 The TILA should not be interpreted so restrictively. The expressed concerns of Congress, as stated in § 102, were not limited to disclosure of the actual cost of credit only. One purpose of TILA was "to protect the consumer against inaccurate and unfair credit billing and credit card practices." (emphasis added). Another was full disclosure of terms and conditions of credit card charges to promote intelligent comparison shopping by consumers contemplating the use of credit:

 
Title I, the truth in lending and credit advertising title, neither regulates the credit industry, nor does it impose ceilings on credit charges. It provides for full disclosure of credit charges, rather than regulation of the terms and conditions under which credit may be extended. It is the view of your committee that such full disclosure would aid the consumer in deciding for himself the reasonableness of the credit charges imposed and further permit the consumer to "comparison shop" for credit. It is your committee's view that full disclosure of the terms and conditions of credit charges will encourage a wiser and more judicious use of consumer credit.

 H.R. Rep. No. 1040, 90th Cong., 2d Sess. (1968), reprinted in [1968] U.S. Code Cong. & Ad. News 1962, 1963 (emphasis added). The TILA must be liberally construed to effectuate these remedial purposes. Mourning v. Family Publications Service, 411 U.S. 356, 36 L. Ed. 2d 318, 93 S. Ct. 1652 (1973); see, Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246 (3d Cir. 1980); Zeltzer v. Carte Blanche Corp., 514 F.2d 1156 (3d Cir. 1975).


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