Taylor v. Bank of America CorporationTaylor v. Bank of America Corporation
This matter comes before the court on Defendant‘s Motion to Dismiss the Amended Complaint for Failure to State a Claim [DE 36]. Pursuant to
No party objects to Judge Jones’ recitation of the procedural background of this case, and the court recounts it here. Plaintiffs, who are members of the United States military and Bank of America credit card holders, bring this putative class action alleging generally that Defendant Bank of America “charg[ed] interest rates and fees that were too high, allowing unlawful charges to improperly inflate servicemembers’ principal balances, and charging interest (including compound interest) on these inflated balances” and then concealed the overcharges in violation of the Servicemembers Civil Relief Act (“SCRA“), the Miliary Lending Act (“MLA“), the Truth in Lending Act (“TILA“), and the Credit CARD Act of 2009 (“CARD Act“), and state law giving rise to claims for breach of contract, breach of implied covenant of good faith and fair dealing, unfair and deceptive trade practices, negligence, negligent misrepresentation, and breach of fiduciary duty or special trust. Am. Compl, DE 33. Plaintiffs specifically allege that Defendant implemented the SCRA through a program that promised greater benefits than the SCRA required, known as the Military Benefits Program, but in actuality failed to meet even the minimum SCRA requirements and charged a “veteran penalty” on service members after they left active duty. Id. Defendant responded to the operative pleading by filing the present motion to dismiss, asserting that the bank fully complied with the SCRA, and that all of Plaintiffs’ legal theories fail as a matter of law. DE 37.
This court referred the motion to Judge Jones for a memorandum and recommendation. Text Ord., Oct. 22, 2025. Judge Jones recommends dismissal of all claims against Defendant for Plaintiffs’ failure to state plausible claims for relief. See DE 49. Specifically, Judge Jones found that Plaintiffs’ allegations supporting their SCRA, TILA, and CARD Act claims reflect improper interpretations of the statutes or are otherwise conclusory. Id. Judge Jones further determined that
II. Legal Standards
For dispositive matters, magistrate judges may be designated to conduct hearings (if appropriate) and submit to the district court proposed findings and recommendations for the disposition of such matters.
The court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.”
Plaintiffs contend that Judge Jones erred by (1) finding the SCRA permits the computation of daily compound interest for each credit card agreement; (2) relying on legislative history to interpret unambiguous statutory language; (3) suggesting that a regulatory guidance exception allows Defendant to increase interest rates during and after military duty; (4) finding that “extension of consumer credit” does not include each swipe of a credit card and ignoring the fact that Defendant amended Plaintiffs’ agreements to include new terms, thus, effectively creating new agreements; and (5) concluding that “general” contract language concerning “protected balances” does not apply in favor of more “specific” language concerning military lending disclosures. See DE 50. Defendant lodged no objections to the M&R and argues that “Judge Jones correctly rejected all of [Plaintiffs‘] theories.” DE 51 at 6.
IV. Analysis
Here, the parties do not object to Judge Jones’ application of the proper legal standard by which to evaluate the present motion. A
Although “a complaint attacked by a
A. SCRA Claims (First Cause of Action)
Plaintiffs do not object to Judge Jones’ recitation of the statute and relevant case law applicable to their SCRA claims, and the court finds no error in Judge Jones’ reliance on these standards. See DE 49 at 3-4. The SCRA provision at issue here is the interest rate limitation found in
1. Finding the SCRA Permits Computation of Daily Compound Interest
Plaintiffs allege that Defendant has violated the SCRA by failing to charge a 6% simple interest rate on pre-active-duty credit balances, as required by the SCRA. Specifically, Plaintiffs allege that Defendant‘s computation of interest involves an “average daily balance method” that improperly compounds daily interest and inflates the rate above the statutory 6% cap. Am. Compl. ¶ 109 (“Simply put, plugging a ‘6%’ into this algorithm results in an interest rate that is well above the 6% allowed by the SCRA.“). Plaintiffs also allege that Defendant failed to “forgive” any interest that accrued over 6% during the Plaintiffs’ period of service. Id.
Defendant seeks dismissal of these claims arguing that the SCRA does not require a “simple” interest method nor that the bank compute interest differently for active duty service members than for civilian card holders. Defendant asserts that the “legislative history [of the SCRA] is directly on point and rejects Plaintiffs’ interpretation.” DE 51 at 6. Plaintiffs counter that prevailing law establishes a “general rule” that “where a statute ‘is silent as to whether interest is simple or compound,’ the plain language alone is dispositive: only simple interest is allowed.” DE 50 at 4-5 (citations omitted). Judge Jones concluded that “[t]he court need not ... rely on a
The court respectfully disagrees with the M&R in three respects: (1) relying on the legislative history without first determining that the statutory language was unclear and/or ambiguous; (2) finding the term “simple interest” to be a “limiting” principle; and (3) relying on a legislative record that does not necessarily support Defendant‘s position. See id. at 5-6.
First, no party disputes that setting an interest rate is a separate question from determining an interest computation method and, here, the SCRA does not expressly identify a specific method. Plaintiffs argue that such omission in the plain language of the statute demonstrates Congress’ intent to default to a simple interest method, citing a “general rule” providing that “in the absence of a contract therefor or some statute, compound interest is not allowed to be computed upon a debt.” See DE 50 at 4 (quoting Cherokee Nation v. United States, 270 U.S. 476, 490 (1926)); see also Silicon Knights, Inc. v. Epic Games, Inc., 917 F. Supp. 2d 503, 526 (E.D.N.C. 2012), aff‘d, 551 F. App‘x 646 (4th Cir. 2014) (“Typically, compound interest is not permitted unless otherwise specified by statute or by contract.“); Samson Expl., LLC v. Bordages, 694 S.W.3d 195, 208 (Tex. 2024), as corrected on denial of reh‘g (Aug. 30, 2024) (“absent clear and specific contractual or statutory authorization, compound interest is prohibited, and only simple interest is available“). Defendant does not dispute that the method it uses to compute interest on service members’ obligations during the relevant period is a “compound” method or, at least, is not a “simple” method. The court finds that under the plain language of the statute and in the absence of other statutory authorization or of a valid agreement to forego the SCRA‘s statutory cap, the general rule prohibiting compound interest applies.
According to the Fourth Circuit, it is a cardinal rule of statutory construction that, when
The Fourth Circuit instructs that, in interpreting the plain language of a statute, courts must “give the words of a statute their ordinary, contemporary, common meaning, absent an indication Congress intended them to bear some different import.” Id. (quoting Williams v. Taylor, 529 U.S. 420, 431 (2000)). In addition, courts must “abide by ‘the cardinal rule that statutory language must be read in context [because] a phrase gathers meaning from the words around it.‘” Id. (quoting Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 596 (2004)); see also Lara-Aguilar v. Sessions, 889 F.3d 134, 143 (4th Cir. 2018) (quoting Hibbs v. Winn, 542 U.S. 88, 101 (2004)) (“A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.“).
It is “[o]nly when statutory text is ambiguous” that courts should “consider other indicia of congressional intent such as the legislative history.” United States v. Chaudhri, 134 F.4th 166, 177 (4th Cir.), cert. denied, 146 S. Ct. 208 (2025) (quoting Snyder‘s-Lance, Inc. v. Frito-Lay N. Am., Inc., 991 F.3d 512, 516 (4th Cir. 2021)).
Here, the applicable statute reads, in pertinent part:
(1) Limitation to 6 percent
An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember‘s spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent - ...
(B) during the period of military service, in the case of any other obligation or liability.
This conclusion is reinforced by the language surrounding and supporting the applicable statute, as well as by the statute‘s own purpose. Section 3937 requires not only that no interest exceeding six percent per year be charged during the military member‘s period of service, but also that any “[i]nterest at a rate in excess of 6 percent per year that would otherwise be incurred but for the prohibition in paragraph (1) is forgiven.”
The statute‘s express language also aligns with the statute‘s purpose “to ensure that servicemembers do not suffer financial or other disadvantages as a result of entering the service, so that such persons would be able to ‘devote their entire energy to the defense needs of the Nation.‘” Sibert v. Wells Fargo Bank, N.A., 184 F. Supp. 3d 296, 303 (E.D. Va. 2016), aff‘d, 863 F.3d 331 (4th Cir. 2017) (quoting
In sum, the plain language of the statute reflects that no interest shall exceed the annual rate of six percent during the card holder‘s period of military service. The court finds this language consistent with the general rule that “only simple interest is allowed,” absent other statutory authorization or a valid contract governing the computation method. No party argues that another statute or a mutual agreement exists expressly approving a method of interest computation that may exceed the SCRA‘s statutory cap, and the court has found none.
2. Relying on SCRA‘s Legislative History
The Fourth Circuit instructs that, when statutory language is plain and unambiguous, the court‘s examination of the statute ceases, and “there is no need for recourse to legislative history.”
As already explained, the omission of the word “simple” from the statutory definition of “interest” does not render the statute unclear or ambiguous; the language Congress used demonstrates clearly its intent that interest be computed in such a way that a statutory obligation shall bear no interest exceeding the rate of six percent per year. It is undisputed that applying a simple interest computation to a service member‘s obligation at an annual rate of six percent would not result in “borne” interest that exceeds the statutory cap. Accordingly, any addition of the word simple, which would be, essentially, redundant, does not “limit” the language or the import of the statute and, thus, the Russello presumption does not apply.
Even if the court were to consider the legislative record presented by the Defendant, the court finds it does not contain a clear expression of Congress’ intent. Proposed bill H.R. 100, which was reported on April 30, 2003, contains the term “simple interest” in the definition of “interest” governing this matter. H.R. 100, 108th Cong. § 207(d). The court reasonably assumes,
I am especially pleased that this measure maintains the 6 percent interest cap for loans such as mortgages and credit cards, while clarifying that any excess interest is forgiven and does not accrue. I applaud the banking community for forgiving the excess interest in the past; I believe it is important to document the intent of Congress in this respect for the future. Many of our reserve component members take a major pay cut when we as a nation call them up for service. It is crucial that our troops not worry about financial issues at home when they are in harm‘s way abroad.
149 Cong. Rec. H3700 (2003) (emphasis added). The Representatives’ statements appear to indicate an understanding that interest is to be computed without accrual and in such a way as to ensure that monthly payments are reduced, as they might be if a simple interest method were applied. The fact that these statements may be construed to contradict (or, at least, to be inconsistent with) the agreement not to keep the added word “simple” in the definition of “interest” demonstrates why relying on a legislative history can be, in some circumstances, a risky business. Cf., e.g., Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 650 (1990) (finding “it is a
In sum, it is error to rely on a portion of the SCRA‘s legislative history without first finding that the statutory language is unclear or ambiguous.
3. Plausibility of SCRA Violations Allegations (First Cause of Action)
Judge Jones analyzed Plaintiffs’ allegations that Defendant‘s use of an “average daily balance” method results in the unlawful imposition of an interest rate above 6% and that Defendant improperly increased the interest and fees on card holders after their departure from the military to recoup some or all of the interest rate reduction during their service. See DE 49 at 6-10. He concluded that the allegations regarding method application are “speculative and conclusory” (id. at 7) and those regarding recouping forgiven interest do not state violations of the SCRA (id. at 10). Plaintiffs do not specifically object to these findings. See DE 50. Accordingly, the court reviews Judge Jones’ findings only for “clear error.” Diamond, 416 F.3d at 315.
a. Allegations Regarding “Average Daily Balance” Method
First, the court finds no clear error in Judge Jones’ conclusion that the average daily balance method set forth in the subject agreements “is clearly disclosed in the credit card agreement, as required by TILA and in conformity with the regulations that expressly recognize the ‘average daily balance’ method.” DE 49 at 8. However, the court finds error in the conclusion that Plaintiffs’ allegations are insufficient to meet the plausibility standard. The M&R concludes that the operative pleading contains “no non-conclusory facts ... regarding inflated balances or the
Plaintiffs allege that during the entire period they were on active duty and in Defendant‘s Military Benefits Program, Defendant charged them at an interest rate higher than 6% on their pre-service obligations. Am. Compl. ¶¶ 46, 55, 67. Specifically, Plaintiffs assert that “Defendant applies a rate above 6% per year through a complex algorithm it uses to impose interest, including daily compound interest calculated on an ‘average daily balance,’ and through the imposition of certain fees.” Id. ¶ 80. Further, Plaintiffs allege that “on a monthly basis Defendant sent Plaintiffs and class members account statements which reflected the appropriately reduced interest rate during times of active duty and during additional periods for which benefits were provided under the Military Benefits Program, when Defendant was in fact charging significantly higher interest rates on those accounts, including but not limited to, through compound interest. ... These higher interest rates improperly inflated Plaintiffs’ and class members’ outstanding balances, upon which Defendant then charged additional interest.” Id. ¶ 96. Plaintiffs insert the portion of their credit card agreements with Defendant describing the “average daily balance” method of computing interest and allege:
One method by which Defendant overcharged servicemembers was to apply a complex formula to impose interest, resulting in an actual interest rate that exceeded the 6% allowed under the SCRA and Military Benefits Program.
This algorithm has numerous interacting features that have the effect of raising Bank of America‘s credit card interest rates above the SCRA‘s 6% limit, including: interest is charged upon a fictional “average daily balance,” rather than the customer‘s actual loan amount; the so called “average daily balance” is inflated by
treating days with a below-zero balance as if it were a zero balance; inflating interest based upon a pre-cycle balance calculation that is contrived to inflate interest charges, including by failing to account for all pre-cycle transactions; adding daily compound interest calculated upon the inflated and fictional “average daily balances” and “pre-cycle balances.” Simply put, plugging a “6%” into this algorithm results in an interest rate that is well above the 6% allowed by the SCRA.
Id. ¶¶ 108, 109. In seeking to dismiss the SCRA claims, Defendant does not deny that the “average daily balance” method constitutes a compound method of computing interest, nor that compounding interest daily (so long as the balance exceeds zero) causes an increase in the amount of interest charged. See DE 37. Rather, Defendant argues that the SCRA does not require card issuers to compute interest by a simple method and that Plaintiffs fail to allege that Defendant‘s average daily balance method has actually harmed them. See id. at 19-20. The court has already addressed Defendant‘s first argument and disagrees with its second.
Defendant points solely to Plaintiffs’ allegations in ¶ 109, recounted above, in arguing that Plaintiffs allege only three ways in which the average daily balance computation violates the SCRA (the paragraph alleges four), and Plaintiffs fail to allege how each of these ways “affected” them. Id. Plaintiffs counter that their allegations demonstrate Defendant‘s “practice of adding daily compound interest, i.e., interest on top of the 6% interest, compounded daily” as a plausible violation of the SCRA. DE 41 at 5-6. The court agrees with Plaintiffs; at this stage of the litigation, the Plaintiffs need only allege facts demonstrating a plausible violation of the SCRA. Iqbal, 556 U.S. at 679. Here, construing the allegations in their favor, Plaintiffs allege that they participated in the Military Benefits Program, served on active duty, and were subject to Defendant‘s use of the compounding method, which increased the 6% statutory cap by compounding interest daily, on their credit balances. Am. Compl. ¶¶ 36, 38, 46, 50, 52, 55, 62, 63, 67, 80, 92, and 96. Defendant does not rebut that Plaintiffs, at this early stage, possess limited information and “do not [yet] have transaction-level data or the bank‘s algorithm in a useable format.” DE 41 at 8. In
b. Allegations Regarding Recouping Interest Post-Active Duty
Judge Jones found that the “SCRA requires only that the interest rate not exceed 6% ‘during the period of military service’ and, therefore, Plaintiffs’ allegation that Bank of America raised the interest rate above 6% after their active-duty service end[ed] does not state a plausible claim under the SCRA.” DE 49 at 10. This court finds no clear error with this conclusion; to the extent that Plaintiffs allege only that Defendant violates the SCRA when it reinstates the pre-active-duty interest rate on Plaintiffs’ credit card balances upon leaving active duty, such allegations do not state a plausible claim under the SCRA. See
However, Plaintiffs argue that Defendant‘s position “ignores that the SCRA also requires excess interest to be permanently forgiven.” DE 41 at 9. In the operative pleading, Plaintiffs allege that “Defendant applies a rate above 6% per year through a complex algorithm it uses to impose interest .. . . In addition, rather than permanently forgiv[e] the interest and fees, Defendant retroactively takes back this benefit by imposing an interest rate penalty on servicemembers after they leave active duty and return to civilian life.” Am. Compl. ¶¶ 80, 81. Again, to the extent that Plaintiffs allege only that the imposition of the pre-active-duty interest rate upon leaving active duty serves as the “penalty,” such allegations are insufficient to state a plausible claim. However, construed in Plaintiffs’ favor, the allegations state a plausible claim to the extent that they reflect Defendant‘s failure (if any) to forgive any interest charged during active duty service that exceeds
Accordingly, Plaintiffs’ claims alleging that Defendant‘s mere imposition of the pre-active-duty interest rate upon their return from active duty service violates the SCRA are implausible and dismissed. However, Plaintiffs’ allegations that Defendant violates the SCRA by failing to forgive any interest charged during their active duty that exceeds the annual rate of 6% and, instead, includes it in balances subject to the interest rate imposed upon Plaintiffs’ return from active duty, state plausible claims of SCRA violations.
B. TILA Claims (Fourth Cause of Action)
Plaintiffs also do not specifically object to Judge Jones’ recitation of the applicable legal standards and finding that allegations supporting their TILA claims are speculative and conclusory. See DE 49 at 11-12; DE 50. As properly stated by Judge Jones, the Truth in Lending Act (TILA) requires a creditor, like Defendant, “to provide to the consumer a statement for each billing cycle for which there is an outstanding balance due” that includes, as relevant here, the interest rate and finance charge. DE 49 at 11 (citing Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 235-36 (2004) and
As relevant here, the Amended Complaint alleges:
138. Defendant violated § 1637 and, upon information and belief, other provisions of TILA, by providing monthly account statements and other uniform
correspondence to Plaintiffs and other class members which inaccurately reflected the interest rate that Defendant was applying to the outstanding debt of servicemembers during active military duty. In reality, Defendant applied a mathematical formula that charged interest at a rate significantly higher than that permitted under the SCRA, and Defendant‘s Military Benefits Program.
139. Plaintiffs and other class members relied on the misrepresentations contained in Defendant‘s monthly account statements when choosing to maintain their accounts with Defendant. Had Plaintiffs and other class members known that Defendant was charging them an illegally high interest rate in violation of the SCRA and Defendant’ Military Benefits Program, or that Defendant‘s SCRA benefits were not competitive with those offered by other banks, they would not have incurred additional debt on their accounts but rather would have closed their accounts with Defendant and moved to another bank.
DE 33. In accordance with this court‘s finding that Plaintiffs plausibly allege Defendant charged interest on pre-service obligations during their active duty service that exceeded the 6% statutory cap, the court finds Plaintiffs’ allegations state plausible TILA claims. Construing the allegations in their favor, Plaintiffs assert that the written statements they received as card holders during active duty failed to reflect the true interest rate charged on their balances, and, in relying on these statements, Plaintiffs affirmatively paid Defendant on the outstanding balances and did not seek lower interest rates at different banks. Whether these allegations are, in fact, true is a question for a fact finder. At this stage of the litigation, they are sufficient to state plausible TILA claims, and a finding to the contrary is error.
C. CARD Act Claims (Fifth Cause of Action)
Plaintiffs do not object to Judge Jones’ summary of their CARD Act claims and the applicable legal standards. Plaintiffs allege that Defendant violated the CARD Act by increasing the interest rate on protected balances incurred before, during, and after active duty, resulting in the imposition of unlawful fees and interest. DE 49 at 12 (citing Am. Compl. ¶¶ 142-151). Defendant argues that the regulations permit the resumption of pre-active duty interest rates on existing balances once the SCRA no longer applies. Id. (citing Def‘s Mem., DE 37 at 22-25).
Congress amended TILA through the CARD Act, which provides increased protections on credit card accounts. Id. (citing Lyons v. PNC Bank, N.A., 112 F.4th 267, 273 (4th Cir. 2024)). The CARD Act‘s
If an annual percentage rate or a fee or charge required to be disclosed under § 1026.6(b)(2)(ii), (iii), or (xii) has been decreased pursuant to 50 U.S.C. app. 527 or a similar Federal or state statute or regulation, a card issuer may increase that annual percentage rate, fee, or charge once 50 U.S.C. app. 527 or the similar statute or regulation no longer applies, provided that the card issuer must not apply to any transactions that occurred prior to the decrease an annual percentage rate, fee, or charge that exceeds the annual percentage rate, fee, or charge that applied to those transactions prior to the decrease.
Id. (quoting
Plaintiffs do not object to Judge Jones’ rejection of Plaintiffs’ theory that the regulatory exception does not apply because Defendant “reduced the interest rate under its Military Benefits Program.” See DE 49 at 13-14. Upon review of the record, the court finds this rejection is neither clearly erroneous nor contrary to law.
Rather, Plaintiffs object to Judge Jones’ reliance on the Guidance Exception to find that Defendant does not violate the CARD Act by increasing interest rates after a card holder leaves active duty service. See DE 50 at 6 (“Where the M&R goes astray is its suggestion that the additional guidance exception in
Plaintiffs argue that the Guidance Exception does not apply to Plaintiffs’ active-duty and
Plaintiffs’ second argument, necessarily “in the alternative” to the first in conceding application of the SCRA‘s rate cap only to pre-active-duty balances, fares no better. The court disagrees with Plaintiffs’ premise that “the guidance exemption does not apply to balances incurred during and after active duty, because they are outside the purview of the SCRA, which is limited to pre-duty debt.” DE 50 at 7 (citing
Another fallacy in Plaintiffs’ premise is the assumption that the Guidance Exception permits increases in interest rates on “post-active-duty” balances. By its clear terms, the Guidance Exception permits card issuers to increase rates only on active-duty balances that enjoyed the rate voluntarily reduced to a cap consistent with the SCRA and only to a rate that does not exceed the pre-active-duty interest rate; nothing in the Plaintiffs’ allegations reflects that any further rate increases exceeded the pre-active-duty interest rate or, even, occurred after restoration to the pre-active-duty interest rate. Judge Jones was correct in finding no plausible allegation in this case that Defendant‘s restoration of the interest rates on pre-active-duty and active-duty balances “was attributable to anything other than a consumer leaving military service.” DE 49 at 15 (cleaned up).
Plaintiffs also question the validity of the Guidance Exception and contend that Defendant cannot validly assert it relied in “good faith” on the exception pursuant to
Further, Plaintiffs contend that Defendant may not rely on the good faith defense under
Finally, Plaintiffs assert that the “Military Lending Act preempts any rule that diminishes baseline consumer protections for servicemembers and their dependents,” including the Guidance Exception here. DE 50 at 8 (citing
“[T]he MLA preempts state and federal laws, but only to the extent those laws do not add ‘protection’ to service members.” Davidson v. United Auto Credit Corp., 65 F.4th 124, 134-35 (4th Cir. 2023) (citing
In sum, the court finds Plaintiffs’ allegations supporting their CARD Act claims, including any requests for declaratory relief, fail to state plausible claims for relief and dismisses those claims.
D. MLA Claims (Seventh and Eighth Causes of Action)
Plaintiffs do not object to Judge Jones’ summary of their claims and the applicable legal standards. Plaintiffs allege that Defendant violated the MLA‘s interest rate disclosure requirements by promising not to raise interest rates on existing balances and making no exception for purchases made at the 6% interest rate. DE 49 at 21-22 (citing Am. Compl. ¶ 169). Defendant contends that this claim fails for the same reasons as the SCRA, TILA, and other claims, the MLA does not apply to Plaintiffs Taylor‘s and Hawthorne‘s accounts, and certain harm alleged is not covered under the MLA, all of which Plaintiffs dispute. Id. at 22 (citing Def‘s Mem. at 33-36, DE 37; Pls’ Resp. at 25-32, DE 41).
The MLA was enacted in 2006 to protect active duty service members from predatory lending practices. Id. (citing Wood v. Omni Fin. of Nevada, Inc., No. 1:22-CV-1148-LMB-IDD, 2023 WL 3766524, at *1 (E.D. Va. May 31, 2023)) (citing Department of Defense, Report on
Although the MLA‘s implementing regulations initially did not include open-ended credit accounts, such as credit cards, the definition of “consumer credit” was expanded in 2015 to do so. DE 49 at 22 (citing Steines v. Westgate Palace, L.L.C., No. 6:22-CV-629-RBD-DAB, 2022 WL 18031492, at *3 (M.D. Fla. Dec. 14, 2022) (citing Limitations on Terms of Consumer Credit Extended to Service Members and Dependents, 72 Fed. Reg. 50,582 (Aug. 31, 2007) & 80 Fed. Reg. 43,560 (July 22, 2015))). However, the effective date of that amendment as applied to credit cards was October 3, 2017, and it was not given retroactive effect. Id. at 22-23 (citing
Judge Jones concluded that, because Plaintiffs Taylor and Hawthorne opened their credit card accounts with Defendant prior to October 3, 2017, “they are not covered by the MLA and their claims should be dismissed.” DE 49 at 23. Judge Jones incorporated by reference his order in the related case, Nowlin, et al. v. Wells Fargo Bank, N.A., No. 5:24-cv-00179-M-RJ. Plaintiffs contend that Judge Jones erred “because BOA ‘extends credit’ ‘when the cardholder actually uses
Judge Jones’ order in Nowlin addresses whether the plaintiffs’ MLA claims in that case should be compelled to arbitration. There, Judge Jones concluded that, because the plaintiffs’ accounts—initiated by contract containing an arbitration agreement—were opened prior to the MLA‘s effective date, they were not protected by the MLA, including its provision rendering unenforceable all arbitration agreements governing disputes regarding extensions of consumer credit initiated by “covered members” (including card holders currently serving on active duty). Nowlin, et al. v. Wells Fargo Bank, N.A., No. 5:24-cv-00179-M-RJ, DE 37 (E.D.N.C. Feb. 6, 2026). Judge Jones granted the motion to compel the Nowlin plaintiffs’ claims to arbitration. Id. The Nowlin plaintiffs requested review of that order, and this court, in interpreting the plain language of the applicable statutory provision, found no error by Judge Jones in ultimately compelling the arbitration of two plaintiffs’ claims, but determined the order contrary to law in compelling the arbitration of claims alleged by the third plaintiff, a card holder serving on active
All parties agree that the provision of the MLA applicable here is found in
The MLA does not specifically define the term “extends consumer credit.” Rather, the statute directs the Secretary of Defense to “prescribe regulations to carry out” the statute‘s requirements, including establishing definitions of “creditor” and “consumer credit.”
The Plaintiffs object, arguing that, for open-end accounts, credit is extended both at inception and each time a card holder makes a purchase. But, adopting such definition would invite a redundancy that Congress surely did not intend. The right to incur debt and defer its payment has already been extended at the inception (or renewal) of the agreement; why would such right need to be extended thereafter each time the card holder incurs debt? In fact, parties may enter a credit card account in which no debt is ever incurred; however, the promise remains, because it was made at the inception of the agreement. For these reasons, and those expressed by Judge Jones, the court finds that the MLA claims alleged by Plaintiffs Taylor and Hawthorne are not covered by the MLA, because their agreements were entered before the statute‘s effective date.
With respect to Plaintiff Uyematsu, whose claims indisputably arose after the MLA‘s effective date, Plaintiffs contend that, like his SCRA and CARD Act claim, Uyematsu properly states claims pursuant to
Finally, Plaintiffs contend that Uyematsu properly pleads a violation of the MLA,
In analyzing the Plaintiffs’ contract claims, Judge Jones noted that no “provision in the agreement requir[es] a permanent 6% interest rate,” and that, in fact, one provision expressly states: ”Servicemembers Civil Relief Act: While you remain on active duty, the APR will not be greater than 6.00% pursuant to the terms of the Servicemembers Civil Relief Act.” Am. Compl. ¶ 125, DE 33; see also id. at 58 (italics added). This provision clearly notifies eligible card holders that they will enjoy the 6% interest rate only while on active duty service. Plaintiffs object, however, that another provision in the agreement requires contrary action by Defendant and, if not
Rates for Protected Balances
When an interest rate change for new transactions is applied to your account, any existing balances of that type will be identified as Protected Balances on your statement. These Protected Balances generally are kept at their current APR until the balances are paid in full.
DE 33 at 51. For his MLA claim, Plaintiff Uyematsu argues that this provision, coupled with the SCRA provision, create confusion and violate the MLA,
The court finds Plaintiffs’ theory in this regard separate from their allegations that the credit card agreements contain unmet promises to reduce interest rates to the SCRA‘s cap during active duty. Here, Plaintiffs argue that the agreements create confusion by purportedly contrary terms, but the court is not convinced. The “Protected Balances” provision notifies card holders of the CARD Act‘s general requirement that card issuers may not increase interest rates on “outstanding balances,” except under certain circumstances (see
E. Remaining Claims (Second, Third, Sixth, and Ninth through Eleventh)7
With respect to Plaintiffs’ remaining state law contract and tort claims, Judge Jones found that they failed to state plausible claims for relief. DE 49 at 16-21. Plaintiffs object, arguing only that for the same reasons stated for Uyematsu‘s
Upon de novo review of the Plaintiffs’ breach of contract claims,8 the court disagrees with
Upon review of Judge Jones’ findings and conclusions regarding the remaining claims, the court finds no error and dismisses those claims.
V. Conclusion
Plaintiffs have stated plausible claims under the SCRA, TILA, and MLA based on their allegations, taken at this stage to be true, that Defendant failed to charge interest at the 6% statutory cap on pre-active-duty credit card balances and to notify Plaintiffs of such failure. Accordingly, the following claims, only as described herein,9 will proceed in this action: first (“Defendant charged interest rates higher than 6% on the accounts of Plaintiffs and class members during active military service” (¶ 107; see also 108-110); second (¶ 125, absent the phrase, “and through imposing a veteran penalty“); fourth; and seventh, only as to Plaintiff Uyematsu (¶ 163, absent the third sentence starting “Defendant breached the contract by later increasing the rates ....“). All other causes of action fail to state plausible claims for relief and are dismissed.
SO ORDERED this 4th day of August, 2026.
RICHARD E. MYERS II
CHIEF UNITED STATES DISTRICT JUDGE
Notes
[T]he Board understands that, while the SCRA and some similar state statutes only require creditors to reduce the rates, fees, and charges that apply to obligations incurred before the consumer enters military service, some card issuers voluntarily apply the reduced rate, fee, or charge to transactions that occur after the consumer has entered military service. Accordingly, the Board would adopt a new comment 55(b)(6)-2 clarifying that, if a card issuer decreases all rates, fees, and charges to amounts that are consistent with the SCRA or a similar federal or state statute or regulation (including rates, fees, and charges that apply to new transactions), the card issuer may increase those rates, fees, and charges consistent with § 226.55(b)(6).