What happens when a bank cannot produce a copy of their credit card agreement during a lawsuit for an unpaid account balance?  Well, that was exactly the situation when CitiBank sued Teresa Cooper in the Superior Court of Vermont, and that case typifies the current status of credit card lawsuits nationwide.  Banks cannot seem to produce a copy of their contracts when litigating unpaid accounts.

What CitiBank was able to provide the court was a copy of the monthly billing statements mailed to its customer and the bank sought to recover a summary judgment on the legal theory of Account Stated.  In short, the account was stated month to month via the billing statements, no objections were made by the borrower, so the balance must be true.

Amazingly, credit card companies have tremendous difficulties producing a copy of the written contract. This is because the contract is not contained in one document but is a result of several documents, perhaps dozens or hundreds of documents, generated during the time the account exists that must be read together to come up with the terms of the agreement. 

Oh, what a tangled web we weave. When first we practice to deceive!

In an effort to generate higher profits, banks created flexible contract documents that could be amended or supplemented at any time by simply mailing a notice of changes to interest rates, late fees, over-limit fees, cash advance fees, credit score fees, etc.  So, to figure out what the bank should have charged in any one month, dozens or perhaps hundreds of documents must be reviewed to determine what terms applied from one month to the next.  Of course, the problem is that the banks have failed to create a single depository of all these documents unique to each customer, and the banks themselves struggle to produce the full set of contract documents, let alone to explain how the contacts actually operate in a court of law. 

Well, not really a big deal, right?  I mean, you were mailed a statement of the then current contract terms and you didn’t object, so what’s all the fuss?

At least in the State of Vermont, this is a big fuss.  The court stated that in none of their prior cases had they applied the doctrine of Account Stated to a distantly located bank or other financial institution where no personal relationship existed.   The classic example of a running account is between a farmer and the local supply store, but that hardly resembles the modern relationship between a distant bank and its borrowers.  The court found that the borrower did not, unlike the farmer and his supplier, agree to the amount of the debt. 

“Even if there are situation in which this position (failing to contest the accuracy of a bill) may have merit, it is without merit in credit card transactions because it is based on the assumption that the recipient, upon review of an invoice, can readily determine whether this is an amount he or she owes . . .This assumption does not hold true with credit card agreements and transactions.  Credit card statements often contain multiple interest rates, interest rates which fluctuate from billing period to billing period, and a myriad of other kinds of fees and penalties.”

The court further stated that “[w]hile the credit cardholder, looking at the statement, can see the amount of the charges that were imposed, he or she is unlikely to know whether the charges are consistent with the writings governing the cardholders obligations . . . [T]he Court does not agree that Ms. Cooper’s silence was tantamount to assent to the accuracy of the monthly statements.”

The Court does not agree that Ms. Cooper’s silence was tantamount to assent”

In the absence of providing the court with a complete copy of the credit card contract, the court denied all interest and finance charges and limited recovery to the principal borrowed minus the payments made on the account.

The Vermont court nailed the issue:  Silence is not assent.  Failure to protest the accuracy of a credit card statement is not the same thing as agreement to the charges.  Consumers are simply not able to measure the accuracy of the monthly finance charges.  Without producing the credit card agreement  banks should never recover more that the principal amount borrowed.