Max receives 2 new credit cards in the mail on Dec. 1. He had applied for the on
ID: 2585510 • Letter: M
Question
Max receives 2 new credit cards in the mail on Dec. 1. He had applied for the one from Home Depot, and the other arrives unsolicited from Chase bank. During the month of Dec., Max makes numerous credit card purchases from Home Depot, but he does not use the Chase bank card. On Dec 31, a burglar breaks into Max's apartment and steals both credit cards, along with other items. Max notifies Home Depot of the theft on Jan. 2, but he fails to notify Chase bank. Using the Home Depot credit card, the burglar makes a $500 purchase on Jan. 1 and a $200 purchase on Jan. 2. The burglar then purchases tickets to a concert on the Chase card for $1,000 on Jan 5. Max receives the bills for these charges and refuses to pay for them. Discuss Max’s liability for each of these credit cards.
Business Law Course - Answer need to use legal terms.
Explanation / Answer
Issue:
Whether Max is liable for the charges made ater her credit cards were stolen.
Rule:
The Truth-in-Lending Act (TILA) deals specifically with lost, stolen, and the unauthorized use of credit cards. For credit cards solicited by the cardholder and then lost or stolen, the act limits the liability of the cardholder to $50 for unauthorized charges made prior to the time the creditor is notified. There is no liability for any unauthorized charges made after the date of notice. In the case of the home depot credit card stolen on Dec 31, the $500 charge made on Jan 1, which is prior to max's notice, causes Max to be liable for the $50 limit. For the Jan 2 charge of $200 made after the notification, Max has no liability. TILA also deals with unsolicited credit cards. Unless a credit cardholder accepts an unsolicited card (such as by using it), the cardholder is not liable for any unauthorized charges. Moreover, the act prohibits the issuance of unsolicited credit cards. No notice by the credit cardholder of an unsolicited, unaccepted card is required to absolve the cardholder from liability for unauthorized charges. Therefore, Max owes $50 to the Home Depot Store and nothing to Chase bank.