The Supreme Court of Montana has held that making a change in a credit agreement by way of a “bill stuffer” does not provide sufficient notice to the consumer on which acceptance of the unilateral change to a contract can be expressly or implicitly found. Kortum-Managhan v. Herbergers NBGL, 204 P.3d 693, 700 (Mont. 2009). Thus, the court found that the creditor’s unilateral attempt to amend its original cardholder agreement to include an arbitration clause was ineffective. Id at 701.

    The cardholder agreement under consideration in the case did not include an arbitration clause at the time the cardholder opened her account. The agreement provided, however, that “[t]he Card Issuer may at any time change any term of th[e] Agreement . . . [and that] . . . [the cardholder’s] use of [her] Account to obtain credit after the effective date of the change will constitute [the cardholder’s] acceptance of the change . . .” Id at 695. One year after the account was opened, the card issuer mailed to the cardholder a change in terms notice in the form of a “bill stuffer,” which included, among other changes, the addition of an arbitration provision. The arbitration provision included, among other things, a waiver of the cardholder’s right to a jury trial.

    After the cardholder sued the card issuer for various violations unrelated to the change in terms, the card issuer moved to compel arbitration based on the inclusion of the arbitration clause in the cardholder agreement following the change in terms. The cardholder argued that, because the card issuer often stuffed her monthly billing statement with “copious piles of junk mail,” she routinely threw the materials away without reading them. The district court granted the card issuer’s motion to compel arbitration and dismissed the complaint.

    On appeal, the court focused first on the fact that the change made by the card issuer involved the addition of an arbitration clause. The court framed the issue as whether a credit card “bill stuffer” is sufficient notice to cause a consumer to knowingly and intelligently waive her fundamental constitutional right to a jury trial. The court reasoned that a waiver of fundamental constitutional rights must be done voluntarily, knowingly and intelligently, considering factors such as whether any negotiations were held, whether the clause was part of a standard “take-it-or-leave-it” contact, whether the waiver was conspicuous and whether there was disparity in bargaining power. Id. at 699. In reaching its conclusion, the court found as significant the fact that the cardholder agreement did not contemplate the addition of completely new terms, but instead only provided for making a “change” to any term of the agreement, and that the agreement was a contract of adhesion.

    In addition, the court found the “bill stuffer” to be ambiguous and misleading because other parts of the notice used bold type, capital letters and larger fonts than the information relating to the arbitration clause. It also found that the card issuer had attempted through the use of a “bill stuffer” to lull the cardholder into agreeing to waive her fundamental rights — a practice that the court found to be “sneaky and unfair.”

    Although the fact that the clause under consideration in the case involved waiving a fundamental constitutional right seemed to play a significant role in the court’s decision, the court stated its conclusion more broadly. Card issuers may wish to examine the change-in-terms provisions of their credit card agreements and their change-in-terms practices in light of this Montana opinion.

    • Judy Scheiderer and Margaret Stolar


    The FTC is seeking comment on its Trade Regulation Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations. Under the Rule, sellers of certain consumer goods or services made via a “door-to-door sale” must, among other things, make certain oral and written disclosures regarding the buyer’s right to cancel the contract. The Rule also expressly preempts any state laws or municipal ordinances that are directly inconsistent with the Rule. See 16 CFR Part 429. The deadline for comments and answers to specific questions is June 22, 2009.

    • Judy Scheiderer and Margaret Stolar