## Facts

- Credit cardholders sued several issuers and merchants, seeking class relief for alleged breaches of cardholder agreements.
- Plaintiffs alleged defendants changed credit terms (e.g., annual fees, minimum payment requirements, and finance-charge computations) and asserted the changes were void for lack of consideration.
- First National Bank of Chicago notified Visa cardholders it would impose a $20 annual fee and raise the minimum monthly payment from 4% to 5%, effective July 1, 1980, and stated the new terms would apply only if the card was used after June 30, 1980.
- J.C. Penney changed its practice to assess finance charges from the date of purchase rather than from the billing date for future purchases.
- Sears notified cardholders of revised finance-charge calculations using average daily balance methods that included account activity during the billing period.
- Harris Trust, issuer of Master Charge cards to one plaintiff, implemented similar types of changes.
- In each instance, defendants notified cardholders that continued use of the card after the effective date would constitute acceptance of revised terms.
- The circuit court dismissed the amended complaint with prejudice; plaintiffs appealed.

## Issues

1. Whether credit cardholder agreements create bilateral contracts fixing credit terms, or instead operate as revocable offers accepted with each use and modifiable prospectively by notice plus continued use.
2. Whether revised credit-card terms are invalid for lack of consideration when imposed after issuance of the card and initial agreement.

## Decision

- The appellate court affirmed the dismissal with prejudice.
- The court treated the credit-card relationship as an arrangement in which the issuer extends a standing offer of credit that the cardholder accepts by using the card under current terms.
- Prospective changes were enforceable where cardholders received notice and were told that post-effective-date use would signify acceptance.
- The modifications were not void for lack of consideration because the issuer’s continued extension of revolving credit under the new terms constituted consideration.
- Because defendants had no contractual duty to maintain the original terms indefinitely, the amended complaint failed to state a claim for breach or lack of consideration.

## Legal Principles

- A revolving credit-card plan is generally not a fixed-term bilateral contract obligating the issuer to continue extending credit on unchanged terms.
- An issuer may prospectively change credit-card terms by giving notice and conditioning continued availability of credit on the cardholder’s acceptance.
- A cardholder accepts revised terms by using the card after receiving notice that continued use constitutes acceptance.
- Continued extension of credit under revised terms supplies consideration sufficient to support the modified terms.

## Conclusion

The court held that issuers could change credit-card terms prospectively with notice and bind cardholders who continued to use their cards, and that continued extension of credit provided adequate consideration, warranting dismissal of claims premised on breach of fixed original terms and lack of consideration.


Garber v. Harris Trust & Sav. Bank, 104 Ill. App. 3d 675, 432 N.E.2d 1309 (Ill. App. Ct. 1st Dist. 1982)