CFPB Protecting Borrowers’ Control Over Their Money

As the economy recovers from the global pandemic, American families and businesses are experiencing higher prices as well as higher interest rates. This includes the interest rates for some credit cards. More than 175 million Americans have at least one credit card, and at any given time, about half of active credit card accounts carry a balance .

Consumer financial protection laws safeguard borrowers’ control over how and when they pay back debt, including credit card debt. For example, the Truth in Lending Act (TILA) contains important protections for consumers who have both a credit card account and a savings or checking account with the same bank. TILA prohibits banks from unilaterally taking money from consumers’ deposit accounts to cover their credit card debt. This protection empowers borrowers to control their own finances. It also gives consumers the chance to double check the amount they owe and dispute any discrepancies. And it ensures that banks that issue credit cards comply with laws governing debt collection, rather than surprising consumers by helping themselves to consumers’ funds.

On Wednesday, the Consumer Financial Protection Bureau (CFPB) filed a friend-of-the-court (“amicus”) brief in the U.S. Court of Appeals for the Fourth Circuit to defend this important protection. In this case, the borrower held a PNC Bank credit card that could access a home-equity line of credit (HELOC)—a form of “open-end” credit that allows homeowners to borrow repeatedly against the equity they’ve built in their homes. When the consumer fell behind on his HELOC payments, PNC withdrew several thousand dollars from his PNC deposit accounts to cover that debt. The bank apparently did so without any warning—even though the consumer says he hadn’t authorized the withdrawals, and even though TILA and its longstanding regulations make that practice illegal.

When the consumer sued PNC for violating TILA, the bank incorrectly claimed that it qualified for an exception to the statute. PNC argued that, because the credit card here was tied to a home-equity line of credit, it did not count as a “credit card account” under TILA or the relevant regulations. The CFPB’s amicus brief explains that this misreads TILA and the nearly 50-year history of the relevant regulations. The result would be an exception that Congress didn’t want and that the regulations don’t provide.

The CFPB is committed to ensuring that consumers are protected to the full extent of the law, especially in this challenging environment of rising interest rates. The CFPB’s brief in this case continues that work by explaining why TILA’s important consumer protections apply to home-equity lines of credit.

The case is Lyons v. PNC Bank, N.A., No. 22-1943 (4th Cir.).

Read the CFPB’s amicus brief.

If you have encountered problems with credit card debt repayment, you can submit a complaint with the CFPB.