In A Matter Of First Impression, The Tennessee Supreme Court Holds That Damages For Loss Of Consumer Credit Are Recoverable Under The Tennessee Consumer Protection Act

In Discover Bank v. Morgan, 363 S.W.3d 479 (Tenn. 2012), the Supreme Court held that under Tenn. Code Ann. § 47-18-109(a) of the Tennessee Consumer Protection Act ("TCPA"), actual damages are recoverable for the loss of available consumer credit due to the actions of a defendant if such damages can be proven with particularity.

In Discover Bank v. Morgan, Discover filed an action against Morgan to recover over $16,000 in credit card charges. Morgan filed an answer and counter-complaint denying any liability for the charges, alleging instead that the credit card had been issued to her deceased husband who had designated Morgan as a mere "authorized user" on the account. Morgan also alleged that Discover had previously informed her that she would not be held responsible for the account if she provided a copy of her husband's death certificate. After Morgan did so, however, Discover attempted to collect the balance from Morgan and reported her nonpayment to the credit reporting agency.

At trial, Morgan alleged that Discover's action injured her credit in a number of ways - she could no longer refinance her property as expected which would have lowered her monthly mortgage payments by at least $200 over fifteen years; her accounts were closed and her credit privileges were suspended by other companies which reduced her available credit from over $123,000 to $5,500; she was unable to open new credit accounts; the annual percentage rate on her other credit cards increased; and she could no longer purchase investment homes at the interest rate previously available to her. Morgan submitted no other evidence to support these damages.

Based upon Morgan's testimony, the trial court awarded her $117,900 for her reduction in available credit, $6,800 for additional home equity costs, $500 in additional interest expenses on her credit cards, for a total of $125,200. Finding that the TCPA applied, the trial court trebled the damages to $375,600, citing Discover's "intentional actions." Finally, the trial court awarded Morgan her attorney's fees of $4,460 for a total recovery of $380,060.

The Court of Appeals vacated the damages award and remanded the case for a new hearing on damages, holding that while a decrease in available credit warranted some measure of damages, the amount should not be calculated on a dollar-for-dollar basis. The Tennessee Supreme Court held otherwise.

The Tennessee Supreme Court began its analysis with a review of section...