Justice SOTOMAYOR delivered the opinion of the Court.
As applicable to this case, Regulation Z—promulgated by the Board of Governors of the Federal Reserve System (Board) pursuant to its authority under the Truth in Lending Act (TILA), 82 Stat. 146, 15 U.S.C. § 1601 et seq.—requires that issuers of credit cards provide cardholders with an "[i]nitial disclosure statement" specifying, inter alia, "each periodic rate" associated with the account. 12 CFR § 226.6(a)(2) (2008). The regulation also imposes "[s]ubsequent disclosure requirements," including notice to cardholders "[w]henever any term required to be disclosed under § 226.6 is changed." § 226.9(c)(1). This case presents the question whether Regulation Z requires an issuer to notify a cardholder of an interest-rate increase instituted pursuant to a provision of the cardholder agreement giving the issuer discretion to increase the rate, up to a stated maximum, in the event of the cardholder's delinquency or default. We conclude that the version of Regulation Z applicable in this case does not require such notice.
Congress passed TILA to promote consumers' "informed use of credit" by requiring "meaningful disclosure of credit terms," 15 U.S.C. § 1601(a), and granted the Board the authority to issue regulations to achieve TILA's purposes, § 1604(a). Pursuant to this authority, the Board promulgated Regulation Z, which requires credit card issuers to disclose certain information to consumers.
The official interpretation of Regulation Z (Official Staff Commentary or Commentary) promulgated by the Board explains these requirements further: Section 226.9(c)(1)'s notice-of-change requirement does not apply "if the specific change is set forth initially, such as ... an increase that occurs when the consumer has been under an agreement to maintain a certain balance in a savings account in order to keep a particular rate and the account balance falls below the specified minimum." 12 CFR pt. 226, Supp. I, Comment 9(c)-1, p. 506 (2008) (hereinafter Comment 9(c)-1). On the other hand, the Commentary explains, "notice must be given if the contract allows the creditor to increase the rate at its discretion but does not include specific terms for an increase (for example, when an increase may occur under the creditor's contract reservation right to increase the periodic rate)." Ibid. As to the timing requirements, the Commentary states: "[A] notice of change in terms is required, but it may be mailed or delivered as late as the effective date of the change... [i]f there is an increased periodic rate or any other finance charge attributable to the consumer's delinquency or default." Id., Comment 9(c)(1)-3, at 507 (hereinafter Comment 9(c)(1)-3).
At least as early as 2004, the Board began considering revisions to Regulation Z. The new regulations the Board eventually issued do not apply to the present case, but the details of their promulgation provides useful background in considering the parties' arguments with respect to the version of Regulation Z we address here. In 2004 the Board issued an advance notice of proposed rulemaking announcing its intent to consider revisions. 69 Fed.Reg. 70925 (2004). In so doing, the Board described how it understood the notice requirements to function at that time:
The Board asked for public comment on whether these "existing disclosure rules" were "adequate to enable consumers to make timely decisions about how to manage their accounts." Id., at 70932.
Subsequently, in 2007, the Board published proposed amendments to Regulation Z and the Commentary. 72 Fed.Reg. 32948. One amendment would have required 45 days' advance written notice when "(i) [a] rate is increased due to the consumer's delinquency or default; or (ii)[a] rate is increased as a penalty for one or more events specified in the account agreement, such as making a late payment or obtaining an extension of credit that exceeds the credit limit." Id., at 33058 (proposed 12 CFR § 226.9(g)). The Board explained that, under the amendments, "creditors would no longer be permitted to provide for the immediate application of penalty pricing upon the occurrence of certain events specified in the contract." 72 Fed.Reg. 33012.
In January 2009, the Board promulgated a final rule implementing many of the proposed changes, scheduled to be effective July 1, 2010. 74 Fed.Reg. 5244. Most saliently, the Board included a new provision, § 226.9(g), which requires 45 days' advance notice of increases in rates due to cardholder delinquency or default, or as a penalty, including penalties for "events specified in the account agreement, such as making a late payment ... ." 12 CFR § 226.9(g)(1)(2010). In May 2009, Congress enacted the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act or Act), 123 Stat. 1734. The Act amended TILA, in relevant part, to require 45 days' advance notice of most increases in credit card annual percentage rates. 15 U.S.C. § 1637(i) (2006 ed., Supp. III). Because the Credit CARD Act's notice requirements with respect to interest-rate increases largely mirror the requirements in the new version of the regulation, the Board changed the effective date of those requirements to August 20, 2009, to coincide with the statutory schedule. See 74 Fed.Reg. 36077-36079. The transactions giving rise to the dispute at issue in this case, however, arose prior to enactment of the Act and the promulgation of the new regulatory provisions.
Respondent James A. McCoy brought this action in the Superior Court of Orange County, California on behalf of himself and others similarly situated against petitioner Chase Bank USA, N. A.; Chase removed the action to the United States District Court for the Central District of California under 28 U.S.C. § 1441. At the time of the transactions at issue, McCoy was the holder of a credit card issued by Chase. The cardholder agreement between the parties (Agreement) provides, in relevant part, that McCoy is eligible for "Preferred rates," but that to keep such rates he has to meet certain conditions, including making "at least the required minimum payments when due on [his] Account and on all other loans or accounts with [Chase] and [his] other creditors." Brief for Respondent 8, n. 2; see also 559 F.3d 963, 972, n. 1 (C.A.9 2009) (Cudahy, J., dissenting). If any of the conditions in the Agreement are not met, Chase reserves the right to "change [McCoy's] interest rate and impose a Non-Preferred rate up to the maximum Non-Preferred rate described in the Pricing Schedule" and to apply any changes "to existing as well as
McCoy's complaint alleges that Chase increased his interest rate due to his delinquency or default, and applied that increase retroactively. McCoy asserts that the rate increase violates Regulation Z because, pursuant to the Agreement, Chase did not notify him of the increase until after it had taken effect.
A divided panel of the United States Court of Appeals for the Ninth Circuit reversed in relevant part, holding that Regulation Z requires issuers to provide notice of an interest-rate increase prior to its effective date. See 559 F.3d, at 969. Concluding that the text of Regulation Z is ambiguous and that the agency commentary accompanying the 2004 request for comments and the 2007 proposed amendments favors neither party's interpretation, the court relied primarily on the Official Staff Commentary; in particular, the court noted that Comment 9(c)-1 requires no notice of a change in terms if the "specific change" at issue is set forth in the initial agreement. See id., at 965-967. The court found, however, that because the Agreement vests Chase with discretion to impose any Non-Preferred rate it chooses (up to the specified maximum) upon McCoy's default, the Agreement "provides McCoy with no basis for predicting in advance what retroactive interest rate Chase will choose to charge him if he defaults." Id., at 967. Accordingly, the court held that because the Agreement does not alert McCoy to the "specific change" that will occur if he defaults, Chase was obliged to give notice of that change prior to its effective date. Ibid. Relying primarily on the 2004 notice of proposed rulemaking and the 2007 proposed amendments, the dissenting judge concluded that Regulation Z does not require notice of an interest-rate increase in the circumstances of this case. See id., at 972-979 (opinion of Cudahy, J.).
After the Ninth Circuit's ruling, the United States Court of Appeals for the First Circuit decided the same question in Chase's favor. See Shaner v. Chase Bank USA, N. A., 587 F.3d 488 (2009). The First Circuit relied in part on an amicus brief submitted by the Board at the court's request, in which the agency advanced the same interpretation of Regulation Z that it now does before this Court. Id., at 493. We granted certiorari to resolve this division in authority.
In order to decide this case, we must determine whether an interest-rate increase constitutes a "change in terms" under Regulation Z, when the change is made pursuant to a provision in the cardholder agreement allowing the issuer to
Our analysis begins with the text of Regulation Z in effect at the time this dispute arose. First, § 226.6 requires an "[i]nitial disclosure statement":
Second, § 226.9(c) requires certain "[s]ubsequent disclosure requirements":
The question is whether the increase in McCoy's interest rate constitutes a change to a "term required to be disclosed under § 226.6," requiring a subsequent disclosure under § 226.9(c)(1). One of the initial terms that must be disclosed under § 226.6 is "each periodic rate that may be used to compute the finance charge ... and the corresponding annual percentage rate." § 226.6(a)(2). McCoy argues that, because an increase in the interest rate increases the "periodic rate" applicable to his account, such an increase constitutes a change in terms within the meaning of § 226.9(c)(1). As further support, McCoy points to two provisions in § 226.9(c): first, that notice of an increase in the interest rate must be provided "before the effective date of the change" when the increase is due to "the consumer's delinquency or default," § 226.9(c)(1); and second, that no notice is required of a change resulting "from the consumer's default or delinquency (other than an increase in the periodic rate or other finance charge)," § 226.9(c)(2). Accordingly, because
We recognize that McCoy's argument has some force; read in isolation, the language quoted above certainly suggests that credit card issuers must provide notice of an interest-rate increase imposed pursuant to cardholder delinquency or default. But McCoy's analysis begs the key question: whether the increase actually changed a "term" of the Agreement that was "required to be disclosed under § 226.6." If not, § 226.9(c)'s subsequent notice requirement with respect to a "change in terms" does not apply. Chase argues precisely this: The increase did not change a term in the Agreement, but merely implemented one that had been initially disclosed, as required. This interpretation, though not commanded by the text of the regulation, is reasonable. Section 226.6(a)(2) requires initial disclosure of "each periodic rate that may be used to compute the finance charge." The Agreement itself discloses both the initial rate (Preferred rate) and the maximum rate to be imposed in the event of default (Non-Preferred rate). See Brief for Respondent 8, n. 2; Brief for Petitioner 13-14.
This reading still leaves the question why § 226.9(c)(1) refers to interest-rate increases resulting from delinquency or default if such increases do not constitute a "change in terms." One reasonable explanation Chase offers is that § 226.9(c)(1) refers to interest-rate increases that were not specifically outlined in the agreement's initial terms (unlike those in the present Agreement). For example, credit card agreements routinely include a "reservation of rights" provision giving the issuer discretion to change the terms of the contract, often as a means of responding to events that raise doubts about the cardholder's creditworthiness. An issuer may exercise this general contract-modification authority and raise the interest rate applicable to the account to address any heightened risk. See Brief for Petitioner 6. In such a case, § 226.9(c)(1) is best read to require that notice must be given prior to the effective date of the increase, because the unilateral increase instituted by the issuer actually changed a term—the interest rate—in a manner not specifically contemplated by the agreement.
In short, Regulation Z is unclear with respect to the crucial interpretive question: whether the interest-rate increase at issue in this case constitutes a "change in terms" requiring notice. We need not decide which party's interpretation is more persuasive, however; both are plausible, and the text alone does not permit a more definitive reading. Accordingly, we find Regulation Z to be ambiguous as to the question presented, and must therefore look to the Board's own interpretation of the regulation for guidance in deciding this case. See Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, 557 U.S. ___, ___, 129 S.Ct. 2458, 2469-2470, 174 L.Ed.2d 193 (2009) (stating that when an agency's regulations construing a statute "are ambiguous ... we next turn to the agencies' subsequent interpretation of those regulations" for guidance); Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 560, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980) (stating that when the question presented "is not governed by clear expression in the ... regulation ... it is appropriate to defer to the Federal Reserve Board and staff in determining what resolution of that issue" is appropriate).
The Board has made clear in the amicus brief it has submitted to this Court that, in the Board's view, Chase was not required to give McCoy notice of the interest rate increase under the version of Regulation Z applicable at the time. Under Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997), we defer to an agency's interpretation of its own regulation, advanced in a legal brief, unless that interpretation is "plainly erroneous or inconsistent with the regulation." Id., at 461, 117 S.Ct. 905 (internal quotation marks omitted). Because the interpretation the Board presents in its brief is consistent with the regulatory text, we need look no further in deciding this case.
In its brief to this Court, the Board explains that the Ninth Circuit "erred in concluding that, at the time of the transactions at issue in this case, Regulation Z required credit card issuers to provide a change-in-terms notice before implementing a contractual default-rate provision." See Brief for United States as Amicus Curiae 11; see also ibid. (stating that when a term of an agreement authorized the credit provider "to increase a consumer's interest rate if the consumer failed to make timely payments ... any resulting rate increase did not represent a `change in terms,' but rather the implementation of terms already set forth in the initial disclosure statement"); id., at 15-16 (stating that "[w]hen a cardholder agreement identifies a contingency that triggers a rate increase, and the maximum possible rate that the issuer may charge if that contingency
In Auer we deferred to the Secretary of Labor's interpretation of his own regulation, presented in an amicus brief submitted by the agency at our invitation. 519 U.S., at 461-462, 117 S.Ct. 905. Responding to the petitioners' objection that the agency's interpretation came in a legal brief, we held that this fact did not, "in the circumstances of this case, make it unworthy of deference." Id., at 462, 117 S.Ct. 905. We observed that "[t]he Secretary's position is in no sense a `post hoc rationalizatio[n]' advanced by an agency seeking to defend past agency action against attack." Ibid. (quoting Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 212, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988)). We added: "There is simply no reason to suspect that the interpretation does not reflect the agency's fair and considered judgment on the matter in question." Auer, 519 U.S., at 462, 117 S.Ct. 905.
The brief submitted by the Board in the present case, at our invitation, is no different. As in Auer, there is no reason to believe that the interpretation advanced by the Board is a "post hoc rationalization" taken as a litigation position. The Board is not a party to this case. And as is evident from our discussion of Regulation Z itself, see Part II-A, supra, the Board's interpretation is neither "plainly erroneous" nor "inconsistent with" the indeterminate text of the regulation. In short, there is no reason to suspect that the position the Board takes in its amicus brief reflects anything other than the agency's fair and considered judgment as to what the regulation required at the time this dispute arose.
McCoy may well be correct in asserting that it is better policy to oblige credit-card issuers to give advance notice of a rate increase; after all, both Congress and the Board have recently indicated that such a requirement is warranted. See Credit CARD Act, § 101(a)(1), 123 Stat. 1735-1736; 12 CFR § 226.9(g) (2009). That Congress and the Board may currently hold such views does not mean, however, that deference is not warranted to the Board's different understanding of what the pre-2009 version of Regulation Z required. To the contrary, the interpretation the Board advances in its amicus brief is entirely consistent with its past views. The 2004 notice of rulemaking and the 2007 proposed amendments to Regulation Z make clear that, prior to 2009, the Board's fair and considered judgment was that "no change-in-terms notice is required if the creditor specifies in advance the circumstances under which an increase ... will occur," 69 Fed.Reg. 70931, and "immediate application of penalty pricing upon the occurrence of certain events specified in the contract" was permissible, 72 Fed. Reg. 33012.
Under Auer, therefore, it is clear that deference to the interpretation in the Board's amicus brief is warranted. The cases McCoy cites in which we declined to apply Auer do not suggest that deference is unwarranted here. In Gonzales v. Oregon, 546 U.S. 243, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006), we declined to defer because—in sharp contrast to the present case—the regulation in question did "little
McCoy further argues that deference to a legal brief is inappropriate because the interpretation of Regulation Z in the Official Staff Commentary commands a different result. To be sure, the Official Staff Commentary promulgated by the Board as an interpretation of Regulation Z may warrant deference as a general matter. See Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981) (holding that "the Board's interpretation of its own regulation" should generally "be accepted by the courts"); Milhollin, 444 U.S., at 565, 100 S.Ct. 790 ("Unless demonstrably irrational, Federal Reserve Board staff opinions construing [TILA] or Regulation [Z] should be dispositive"). We find, however, that the Commentary at issue here largely replicates the ambiguity present in the regulatory text, and therefore it offers us nothing to which we can defer with respect to the precise interpretive question before us.
The Ninth Circuit relied primarily on Comment 9(c)(1)-3, which states in relevant part that "a notice of change in terms is required, but it may be mailed or delivered as late as the effective date of the
Comment 9(c)-1 is also ambiguous, though the most plausible reading supports Chase's position more than it does McCoy's. The Comment begins: "No notice of a change in terms need be given if the specific change is set forth initially" in the agreement. We do not find that the Comment's addition of the modifier "specific" to the word "change" enables us to determine, any more than we could in light of the text of the regulation, see supra, at 880, whether the interest-rate increase at issue in this case was a "change in terms" requiring notice. According to Chase, as long as the agreement explains that delinquency or default might trigger an increased interest rate and states the maximum level to which the rate could be increased, the "specific change" that ensues upon default has been set forth initially and no additional notice is required before implementation. McCoy argues to the contrary: Under Comment 9(c)-1, any new rate imposed after delinquency or default must be disclosed prior to the effective date, if the particular rate (rather than the maximum rate) was not specifically mentioned in the agreement. On the whole, then, the Official Staff Commentary's explanation of Regulation Z does not resolve the uncertainty in the regulatory text, and offers us no reason to disregard the interpretation advanced in the Board's amicus brief.
McCoy further contends that our reliance here on an agency interpretation presented outside the four corners of the Official Staff Commentary will require future litigants, as well as the Board, to expend
Accordingly, we conclude that, at the time of the transactions at issue in this case, Regulation Z did not require Chase to provide McCoy with a change-in-terms notice before it implemented the Agreement term allowing it to raise his interest rate following delinquency or default.
For the foregoing reasons, the judgment of the United States Court of Appeals for the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
"No notice of a change in terms need be given if the specific change is set forth initially, such as: Rate increases under a properly disclosed variable-rate plan, a rate increase that occurs when an employee has been under a preferential rate agreement and terminates employment, or an increase that occurs when the consumer has been under an agreement to maintain a certain balance in a savings account in order to keep a particular rate and the account balance falls below the specified minimum."
The Ninth Circuit concluded that, in contrast to each of these three examples, "the increase here occurs at Chase's discretion." 559 F.3d 963, 966 (2009). That is, once the triggering event—McCoy's default—occurred, Chase had the latitude to increase the interest rate as it saw fit (up to the limit specified in the Pricing Schedule).
We are not persuaded by the Ninth Circuit's reasoning. Certainly, under a "variable-rate" plan the interest rate fluctuates according to an external variable easily discernable by the cardholder (like the Federal Prime rate), and the issuer has no discretion. See ibid. But the Comment's second and third examples do not appear to be significantly different from this case: The agreement contains a preset rate, but it also provides that, on the occurrence of a predefined event (terminating employment or a low account balance), the rate will increase.
Moreover, Comment 9(c)-1 further states that notice is needed "if the contract allows the creditor to increase the rate at its discretion but does not include specific terms for an increase"—for example, "when an increase may occur under the creditor's contract reservation right to increase the periodic rate." It would seem that the narrower latitude Chase had under the Agreement to set the precise new rate within a specified range after McCoy defaulted is not the kind of "discretion" the last example of Comment 9(c)-1 contemplates. In short, analogizing to the Comment's examples suggests that Chase's action in setting a new rate was most likely a "specific change" that the Agreement itself contemplated, and subsequent disclosure was not clearly required.
