American Express Co. v. Koerner, 452 U.S. 233 (1981)

American Express Co. v. Koerner

No. 80-202

Argued April 20, 1981
Decided June 8, 1981
452 U.S. 233

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Syllabus

Section 161(a) of the Truth in Lending Act (TILA), as added by the Fair Credit Billing Act, provides that, whenever a creditor sends an obligor a statement of the obligor’s account "in connection with an extension of consumer credit" and the obligor believes that the statement contains a billing error, the obligor may send the creditor a written notice. If such a notice is sent, the creditor then must acknowledge receipt of it, investigate the matter, and either correct the account or send a written explanation of its belief that the original statement was correct. Section 103(h) of the TILA provides that the adjective "consumer," used with reference to a credit transaction, characterizes the transaction as one in which the party to whom credit is offered or extended "is a natural person" and the money, property, or services which are the subject of the transaction are "primarily for personal, family, household, or agricultural purposes." A corporation of which respondent is an officer applied to petitioner for a "company account" designed for business customers and asked petitioner to issue credit cards to respondent and other officers. Respondent was required to sign a "company account" form, agreeing to be jointly and severally liable with the company for all charges incurred through use of the card issued to him. Cards were issued on the company’s credit rating. A dispute arose between the company and petitioner with respect to charges for flight insurance for certain business trips made by company employees and for renewal of cards that the company claimed were no longer desired, and the company refused to pay the amount in dispute. Company officers wrote to petitioner several times about this, but it does not appear that petitioner ever responded. Subsequently, when respondent attempted to use his company card, he was informed that the account had been canceled because of delinquency in payment. Respondent then filed an action in Federal District Court, alleging, inter alia, that petitioner had canceled the account because of respondent’s company’s refusal to pay the disputed charges, and seeking damages for petitioner’s failure to comply with § 161(a). The District Court granted summary judgment for petitioner, holding that § 161(a) did not apply to an account opened in the name of a corporation in reliance on the corporation’s credit. The Court of Appeals reversed.

Held: Section 161(a) is not applicable to the dispute between these parties, and hence petitioner was not required to follow the procedures mandated by § 161(a). The threshold requirement of § 161(a) -- an "extension of consumer credit" -- was not satisfied. The company account was not covered by § 103(h)’s definition of "consumer," because it was opened primarily for business purposes, and not "primarily for personal, family, household, or agricultural purposes." Similarly, the transactions giving rise to the billing dispute cannot be characterized as extensions of consumer credit, since they were business transactions. Pp. 240-246.

615 F.2d 191, reversed.

BLACKMUN, J., delivered the opinion for a unanimous Court.