George
Izraelewitz, Plaintiff, v. Manufacturers Hanover Trust Company,
Defendant
Civil Court of the City of New York,
Kings County
120 Misc. 2d 125; 465 N.Y.S.2d 486;
1983 N.Y. Misc. LEXIS 3678
July 19, 1983
As the texture of the American economy evolves from
paper to plastic, the disgruntled customer is spewing its wrath upon
the purveyor of the plastic rather than upon the merchant.
Plaintiff George Izraelewitz commenced this action to compel the
defendant bank Manufacturers Hanover Trust Company to credit his
Mastercharge account in the amount of $ 290 plus finance charges. The
disputed charge, posted to plaintiff's account on July 16, 1981, is for
electronic diagrams purchased by plaintiff via telephone from Don
Britton Enterprises, a Hawaii-based mail order business.
On September 9, 1981 plaintiff advised defendant bank, Manufacturers
Hanover Trust Company (Trust Company), that the diagrams had been
unsuitable for his needs and provided defendant with a UPS receipt
indicating that the purchased merchandise had been returned to Don
Britton. Defendant's customer service department credited plaintiff's
account and waived finance charges on the item. Trust Company
subsequently proceeded to charge back the item to the merchant. The
merchant refused to charge back through The 1st Hawaii Bank, and
advised defendant bank of their strict "No Refund" policy. Don Britton
also indicated that plaintiff, during the course of conversation, had
admitted that he was aware of this policy. On April 1, 1982 defendant
advised plaintiff that his account would be redebited for the full
amount. At two later dates, plaintiff advised Trust Company of said
dispute, denied knowledge of the "No Refund" policy and stated that the
goods had been returned. The Trust Company once again credited
plaintiff's account and attempted to collect from Don Britton. The
charge back was again refused and plaintiff's account was subsequently
redebited.
Bank credit agreements generally provide that a cardholder is obligated
to pay the bank regardless of any dispute which may exist respecting
the merchandise. An exception to this rule arises under a provision in
the Truth in Lending Law which allows claimants whose transactions
exceed $ 50 and who have made a good-faith attempt to obtain
satisfactory resolution of the problem, to assert claims and defenses
arising out of the credit card transaction, if the place of the initial
transaction is in the same State or within 100 miles of the cardholder.
(Consumer Credit Protection Act, US Code, tit 15, § 1666i.)
It would appear that plaintiff is precluded from asserting any claims
or defenses since Britton's location exceeds the geographical
limitation. This assumption is deceiving. Under Truth in Lending the
question of where the transaction occurred (e.g., as in mail order
cases) is to be determined under State or other applicable law. (Truth
in Lending Regulations, 12 CFR 226.12 [c].) Furthermore, any State law
permitting customers to assert claims and defenses against the card
issuer would not be pre-empted, regardless of whether the place of the
transaction was at issue. In effect, these Federal laws are viewed as
bare minimal standards.
In Lincoln First Bank v Carlson (103 Misc 2d 467, 470) the court found
that: "[The] statement that a card issuer is subject to all defenses if
a transaction occurred less than 100 miles from the cardholder's
address, does not automatically presume a cardholder to give up all his
defenses should the transaction take place at a distance of greater
than 100 miles from the mailing address."
The facts at bar do not warrant a similar finding. Whereas in Lincoln
(supra), the cardholder's defense arose due to an alleged failure of
the card issuer itself to comply with statutory rules, the defendant
herein is blameless. The geographical limitation serves to protect
banks from consumers who may expose them to unlimited liability through
dealings with merchants in far-away States where it is difficult to
monitor a merchant's behavior. These circumstances do not lend the
persuasion needed to cast off this benefit.
Considering, arguendo, that under the Truth in Lending Law plaintiff
was able to assert claims and defenses from the original transaction,
any claims or defenses he chose to assert would only be as good as and
no better than his claim against the merchant. Accordingly, plaintiff's
claim against the merchant must be scrutinized to ascertain whether it
is of good faith and substantial merit. A consumer cannot assert every
miniscule dispute he may have with a merchant as an excuse not to pay
an issuer who has already paid the merchant.
The crux of plaintiff's claim, apparently, is that he returned the
diagrams purportedly unaware of merchant's "No Refund" policy. The
merchant contends that plaintiff admitted that he knew of the policy
and nonetheless used deceptive means to return the plans; in that they
were sent without a name so they would be accepted; were not delivered
to an employee of the company; were not in the original box; and showed
evidence of having been Xeroxed.
"No Refund" policies, per se, are not unconscionable or offensive to
public policy in any manner. Truth in Lending Law neither "[requires]
refunds for returns nor does it prohibit refunds in kind." (12 CFR
226.12 [e].) Bankmerchant agreements, however, usually do contain a
requirement that the merchant establish a fair policy for exchange and
return of merchandise.
To establish the fairness in Don Britton's policy, the strength of the
reasons behind the policy and the measures taken to inform the consumer
of it must necessarily be considered. Don Britton's rationale for its
policy is compelling. It contends that printing is a very small part of
its business, which is selling original designs, and "once a customer
has seen the designs he possesses what we have to sell." Britton's
policy is clearly written in its catalog directly on the page
which explains how to order merchandise. To compensate for not having a
refund policy, which would be impractical considering the nature of the
product, Britton offers well-advertised back-up plans with free
engineering assistance and an exchange procedure, as well, if original
plans are beyond the customer's capabilities. The plaintiff could have
availed himself of any of these alternatives which are all presumably
still open to him.
On the instant facts, as between plaintiff and the defendant bank,
plaintiff remains liable for the disputed debt, as he has not shown
adequate cause to hold otherwise.
Judgment for defendant dismissing the complaint.