Court rules that BofA’s 32% interest rate is fair

An argument of Laura Swanson, Bank of America cardholder, was rejected in a ruling by Judge Frank Easterbrook, the 7th Circuit Court of Appeals in Chicago. The argument was that a Federal Reserve regulation under the Truth in Lending Act barred Bank of America from imposing a 32 percent interest rate after Swanson exceeded her credit limit too often.

7th Circuit said, Swanson's interest rate had increased from 18 percent after she exceeded her credit limit in at least two of the prior 12 months, and then continued to use her card. Bank,of America applied the new rate for the entire December 2007-January 2008 billing cycle, after notifying the card holder in December. However, Swanson said that was an insufficient notice, and demanded a refund of $60 plus statutory penalties.

The appeals court declined to apply Illinois law, as Bank of America is a national bank, and it should assess rates that are lawful in its home state of Delaware.

In a case brought by New York Attorney General Andrew Cuomo, the U.S. Supreme Court is expected to rule on which states may regulate national banks such as Bank of America, and others. The decision is to be announced by June.