CREDIT CARD: Insufficient notice in “bill stuffer” arbitration clause, amendment void… Lympus reversed.

Santana Kortum-Managhan opened a credit card account with Herbergers in 10/98 after an employee asked if she wanted to save 10% on her purchase by filling out an application. The application did not include terms, and Kortum-Managhan claims she never signed any agreement that included terms. She received her card issued by National Bank of the Great Lakes and a Revolving Credit Card Agreement which did not include an arbitration clause but provided that Herbergers could unilaterally change terms including the interest rate and that continued use of the card constituted agreement to a change. Kortum-Managhan sued Herbergers in 9/04 alleging violations of the FDCPA and UTP/CPA for inaccurately reporting to credit bureaus that she had several accounts with Herbergers and its affiliates which impacted her credit score and impeded her application to the Montana Bar. Herbergers moved to dismiss and compel arbitration, alleging that it had mailed a “bill stuffer” in 10/99 with changes in the agreement including a binding arbitration provision to which she agreed through continued use of her account. Kortum-Managhan contended that she either did not receive the change in terms or did not notice it “because Herbergers is continually stuffing her monthly billing statement with copious piles of junk mail” that she routinely tosses. Judge Lympus granted Herbergers’ motion to compel arbitration and dismissed, concluding that Kortum-Managhan’s continued use of her account after Herbergers notified her of the change constituted an agreement to arbitrate and jury waiver. Kortum-Managhan appeals.

Lympus erred in compelling arbitration and dismissing. The “bill stuffer” is ambiguous and misleading because it seeks to waive the cardholder’s constitutional rights with a clause blended into the end of a document when bold type, capital letters, and larger fonts are used to draw attention to other clauses. We agree with Kortum-Managhan that Herbergers attempted to lull her into waiving her rights and that attempting to change terms of a contract through a “bill stuffer” is “sneaky and unfair.” Badie (Cal. 1998) stated:

the language of the “bill stuffer,” as well as the method used to disseminate it, suggests that it was designed to downplay the true significance of the [arbitration provision], and to reduce the likelihood that customers would notice and object to the new provision.

Herbergers cites cases from other jurisdictions. However, only Marsh (ND Tex. 2000) is factually similar, and although the notice which included the arbitration agreement was sent as a “bill stuffer,” First USA submitted ample unrefuted evidence that there was very little chance the consumer would not have received the information or would not have noticed it.Herrington (SD Miss. 2000) states that the consumer was mailed a letter along with the revised agreement. In Goetsch (WDNC 2000), Hill (7th Cir. 1997), and Stiles (MD Ala. 1998) the consumers admitted receiving the arbitration change. Making a change in a credit agreement in a “bill stuffer” does not provide sufficient notice on which acceptance of the change can be expressly or implicitly found. Herbergers’ unilateral attempt to amend its cardholder agreement to include an arbitration clause was ineffective.

Nelson, Warner, Cotter, Leaphart, Morris.

Rice dissented: “This case serves as a reminder that people should read their mail — especially when it comes from their credit card companies.” Hutcherson (Ill. 2003).

Kortum-Managhan entered an agreement with a unilateral change procedure, Herbergers acted according to this provision, and Kortum-Managhan failed to read the notice and continued to accept benefits of the agreement by using the card. She did not establish that the change was beyond her expectations or unconscionable.

Kortum-Managhan v. Herbergers, DA 06-566, last brief 12/18/06, decided 3/17/09.

William Managhan (Managhan & Kortum-Managhan Law Firm), Kalispell, for Kortum-Managhan; Kimberly More, Kalispell, and Leonard Smith, Billings (Crowley Fleck), for Herbergers.