American Express Co. v. Koerner
Headline: Limits on billing-error protections: Court rules creditors need not follow Fair Credit Billing Act procedures for corporate accounts opened for business, leaving officers on company cards without those consumer protections.
Holding: The Court held that the Act’s billing-error procedures do not apply because the account and disputed charges were primarily business, so the credit card company had no statutory duty to follow those procedures.
- Billing-error protections do not cover accounts opened primarily for business.
- Officers on company cards may lack consumer dispute rights under the Act.
- Creditors can treat corporate accounts differently when enforcing unpaid business charges.
Summary
Background
A credit card company issued a "company account" to a corporation and gave cards to five officers, including Louis R. Koerner Sr., who agreed to be jointly and severally liable with the company. The company applied using business account forms; American Express checked the company's credit but not the officers'. The company was billed for all charges with a monthly statement showing a total and subtotals for each user. In 1975 the company disputed about $55 in charges—flight insurance and card renewal fees—and refused to pay. In 1976 the company’s account was canceled for delinquency, and an officer's card was cut when he tried to buy a ticket. The officer sued, claiming the company’s billing dispute led to the cancellation and sought damages.
Reasoning
The Court addressed whether the Fair Credit Billing Act's required billing-error procedures apply when both a corporation and an officer can be liable. The Act covers only an "extension of consumer credit," meaning credit to a natural person for primarily personal purposes. The Court found the account was opened and used primarily for business and the disputed transactions were business-related. It concluded that under any reasonable interpretation—examining the account as a whole or individual transactions—the necessary "consumer credit" element was missing. Therefore the Act's billing-error procedures did not apply. The Court reversed the appeals court and reinstated the district court's judgment.
Real world impact
This ruling means companies and officers who use cards on business accounts generally will not receive the Act’s billing-error protections. Whether those protections apply depends on who the credit was extended to and whether charges are primarily consumer in purpose; outcomes will vary by case.
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