                   FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CHERYL BARRER; WALTER BARRER,            
on behalf of themselves and those            No. 07-35414
similarly situated,                            D.C. No.
                Plaintiffs-Appellants,
                                            CV-06-00415-
                v.                             HA/HU
CHASE BANK    USA, N.A.,                      OPINION
               Defendant-Appellee.
                                         
        Appeal from the United States District Court
                 for the District of Oregon
        Ancer L. Haggerty, District Judge, Presiding

                 Argued and Submitted
           December 11, 2008—Portland, Oregon

                      Filed May 19, 2009

   Before: Diarmuid F. O’Scannlain, Susan P. Graber, and
               Jay S. Bybee, Circuit Judges.

              Opinion by Judge O’Scannlain;
  Partial Concurrence and Partial Dissent by Judge Graber




                              5991
5994                 BARRER v. CHASE BANK USA




                              COUNSEL

Michael D. Braun, Braun Law Group, P.C., Los Angeles, Cal-
ifornia, argued the cause for the appellants and filed the
briefs. Matthew J. Zevin, Stanley, Mandel & Iola, LLP, San
Diego, California, was also on the briefs.

Nancy R. Thomas, Morrison & Foerster LLP, Los Angeles,
California, argued the cause for the appellee and was on the
brief. Robert S. Stern, Morrison & Foerster LLP, Los Ange-
les, California, filed the brief. Shirley M. Hufstedler, Morri-
son & Foerster LLP, Los Angeles, California, and Angela L.
Padilla and Geoffrey Graber, Morrison & Foerster LLP, San
Francisco, California, were also on the brief.


                               OPINION

O’SCANNLAIN, Circuit Judge:

   We must decide whether a credit card company violates the
Truth in Lending Act when it fails to disclose potential risk
factors that allow it to raise a cardholder’s Annual Percentage
Rate.

                                     I

                                    A

  Walter and Cheryl Barrer held a credit card account with
Chase.1 The Barrers received and accepted the Cardmember
  1
    According to Chase, the account was in Walter Barrer’s name only;
Cheryl Barrer was an “Authorized User,” and therefore not legally respon-
sible for the account. For simplicity’s sake, we refer to the couple collec-
tively as “the Barrers.”
                  BARRER v. CHASE BANK USA                 5995
Agreement (“the Agreement”) governing their relationship at
the relevant time in late 2004. In February 2005, Chase
mailed to the Barrers a Change in Terms Notice (“the
Notice”), which purported to amend the terms of the Agree-
ment, in particular to increase the Annual Percentage Rate
(“APR”) significantly. It also allowed the Barrers to reject the
amendments in writing by a certain date. They did not do so,
and continued to use the credit card. Within two months, the
new, higher, APR became effective.

   According to the Barrers’ First Amended Complaint (which
is the operative complaint), they enjoyed a preferred APR of
8.99% under the Agreement. In a section entitled “Finance
Charges,” the Agreement provided a mathematical formula
for calculating preferred and non-preferred APRs and variable
rates. In the event of default, the Agreement stated that Chase
might increase the APR on the balance up to a stated default
rate. The Agreement specified the following events of default:
failure to pay at least a minimum payment by the due date; a
credit card balance in excess of the credit limit on the
account; failure to pay another creditor when required; the
return, unpaid, of a payment to Chase by the customer’s bank;
or, should Chase close the account, the consumer’s failure to
pay the outstanding balance at the time Chase has appointed.

   Another section entirely, entitled “Changes to the Agree-
ment,” provided that Chase “can change this agreement at any
time, . . . by adding, deleting, or modifying any provision.
[The] right to add, delete, or modify provisions includes
financial terms, such as APRs and fees.” The next section,
entitled “Credit Information,” stated that Chase “may periodi-
cally review your credit history by obtaining information from
credit bureaus and others.” These sections appeared five and
six pages, respectively, after the “Finance Charge” section.

  Around April 2005, the Barrers’ noticed that their APR had
“skyrocketed” from 8.99% to 24.24%, the latter a rate close
to a non-preferred or default rate. None of the events of
5996               BARRER v. CHASE BANK USA
default specified in the Agreement, however, had occurred.
When the Barrers contacted Chase to find out why their APR
had increased, Chase responded in a letter citing judgments it
had made on the basis of information obtained from a con-
sumer credit reporting agency. In particular, Chase wrote that:
“outstanding credit loan(s) on revolving accounts . . . [were]
too high” and there were “too many recently opened
installment/revolving accounts.” The Barrers do not dispute
the facts underlying Chase’s judgments.

   Despite the Barrers’ surprise, the Notice they had received
in February contained some indication of what would be
forthcoming. Specifically, it disclosed that Chase would
shortly increase the APR to 24.24%, a decision “based in
whole or in part on the information obtained in a report from
the consumer reporting agency.”

  The Barrers paid the interest on the credit account at the
new rate for three months before they were able to pay off the
balance. Then they sued Chase in federal district court.

                                 B

   The Barrers filed a class action lawsuit on their own behalf
and on behalf of all Chase credit card customers similarly
harmed and similarly situated. The complaint asserted one
cause of action under the Truth in Lending Act (“the Act”),
15 U.S.C. §§ 1601 et seq., and Regulation Z, 12 C.F.R. § 226,
promulgated thereunder. The Barrers claim to have been the
victims of a practice they now call “adverse action re-
pricing,” which apparently means “raising . . . a preferred rate
to an essentially non-preferred rate based upon information in
a customer’s credit report.” Though the Barrers do not claim
that the practice itself is illegal, they do claim that it was ille-
gal for Chase not to disclose it fully to them or to the other
members of the putative class.
                     BARRER v. CHASE BANK USA                           5997
   Chase moved to dismiss the Barrers’ cause of action for
failure to state a claim under the Act, or alternatively to com-
pel arbitration in accordance with the terms of the Agree-
ment’s arbitration provision. The magistrate judge
recommended in favor of Chase on both motions. Because the
district court agreed that the Barrers’ cause of action should
be dismissed, and their case with it, it never reached the mag-
istrate judge’s recommendation regarding Chase’s motion to
compel arbitration, but simply entered judgment for Chase.2
The Barrers timely appeal.

                                     II

   [1] The Truth in Lending Act is designed “to assure a
meaningful disclosure of credit terms so that the consumer
will be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit.” 15
U.S.C. § 1601(a). Rather than substantively regulate the terms
creditors can offer or include in their financial products, the
Act primarily requires disclosure. See Hauk v. J.P. Morgan
Chase Bank USA, 552 F.3d 1114, 1120 (9th Cir. 2009). The
Barrers’ credit card is considered to be an “open end credit
plan,”3 one of the products the Act regulates. Under the typi-
cal commercial arrangement, credit card holders pay a fee,
called a finance charge, in order to draw on their credit
account. The interest rate or rates used to compute the finance
charge generate an APR, a number which is a typical, and
therefore useful, comparative measure of the price of the
  2
     In their briefs, the Barrers challenged the magistrate judge’s conclusion
regarding Chase’s motion to compel arbitration out of an abundance of
caution. Their counsel conceded at oral argument that the challenge was
not ripe.
   3
     The Act defines an “open end credit plan” as “a plan under which the
creditor reasonably contemplates repeated transactions, which prescribes
the terms of such transactions, and which provides for a finance charge
which may be computed from time to time on the outstanding unpaid bal-
ance.” 15 U.S.C. § 1602(i).
5998                BARRER v. CHASE BANK USA
credit the company sells to the consumer. See 15 U.S.C.
§§ 1605(a) & 1606(a)(2).

   [2] In general, the Act regulates credit card disclosures at
numerous points in the commercial arrangement between
creditor and consumer: at the point of solicitation and applica-
tion, at the point the consumer and the creditor consummate
the deal, at each billing cycle, and at the point the parties
renew their arrangement. Id. § 1637(a)-(d). Specifically, cred-
itors must disclose “[t]he conditions under which a finance
charge may be imposed,” “[t]he method of determining the
amount of the finance charge,” and, “[w]here one or more
periodic rates may be used to compute the finance charge,
each such rate . . . and the corresponding nominal annual per-
centage rate.” Id. § 1637(a)(1), (a)(3) & (a)(4). Subsection
1604(a) directs the Board of Governors of the Federal
Reserve System (“the Board”) to “prescribe regulations to
carry out the purposes of” the Act.

   [3] Regulation Z, 12 C.F.R. § 226, provides the precise reg-
ulations that the Barrers claim Chase violated. In general,
these regulations establish two conditions a creditor must
meet. “First, it must have disclosed all of the information
required by the statute.” Rossman v. Fleet Bank (R.I.) Nat’l
Ass’n, 280 F.3d 384, 391 (3d Cir. 2002). That is, disclosures
must be complete. “And second, [they] must have been true—
i.e., . . . accurate representation[s] of the legal obligations of
the parties at [the] time [the agreement was made].” Id.

    [4] Section 226.6 lists the initial disclosures required of a
creditor under a new credit agreement. The list includes “each
periodic rate that may be used to compute the finance charge
. . . and the corresponding annual percentage rate.” 12 C.F.R.
§ 226.6(a)(2). The Board has interpreted this regulation in a
staff commentary,4 comment 11, which provides that “[i]f the
  4
   “Unless demonstrably irrational, Federal Reserve Board staff opinions
construing the Act or Regulation should be dispositive . . . .” Ford Motor
Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980).
                    BARRER v. CHASE BANK USA                       5999
initial rate may increase upon the occurrence of one or more
specific events, . . . the creditor must disclose the initial rate
and the increased penalty rate that may apply” and “an expla-
nation of the specific event or events that may result in the
increased rate.” 12 C.F.R. Pt. 226 Supp. I, par. 6(a)(2), cmt.
11. Even if the rate itself is indeterminate at the time of the
initial disclosure, the creditor must still disclose the specific
event or events leading to a rate increase. Id. As examples of
a specific event, the comment lists “a late payment or an
extension of credit that exceeds the credit limit.” Id.

   [5] Just as section 226.6 states what must be disclosed, so
section 226.5 describes how to disclose it. Among other
things, creditors must make the required disclosures “clearly
and conspicuously in writing.” 12 C.F.R. § 226.5(a)(1).5 And,
again, any disclosures must “reflect the terms of the legal
obligation between the parties.” Id. § 226.5(c).

   Creditors are not required to be clairvoyant, however, for
“[i]f a disclosure becomes inaccurate because of an event that
occurs after the creditor mails or delivers the disclosures, the
resulting inaccuracy is not a violation of [Regulation Z].” Id.
§ 226.5(e). The Board has also recognized that creditors may
reserve the general right to change the credit agreement, as
Chase did in this case. See 12 C.F.R. Pt. 226 Supp. I, par.
6(a)(2), cmt. 2 (recognizing the use of general reservation
clause). Should the creditor make changes in these ways, it
may have to disclose anew under § 226.9(c). Id.

  Finally, although the text of the Act and regulations gov-
erns, we construe that text in favor of the cardholder by
  5
    Subsection 226.5(a)(2) also requires that the finance charge and APR,
“when required to be disclosed with a corresponding amount or percentage
rate, shall be more conspicuous than any other required disclosure.” This
provision does not apply here, however, because we do not address the
required disclosure of a specific APR. We therefore express no opinion on
it, beyond clarifying its non-application to this case.
6000                 BARRER v. CHASE BANK USA
strictly enforcing its regulation against the creditor. Jackson
v. Grant, 890 F.2d 118, 120 (9th Cir. 1989).

                                    III

   The Barrers argue that Chase consciously shielded its “ad-
verse action repricing” program from its customers, deceiving
them as to why their APRs might increase. To phrase it in the
language of the Act, they allege that Chase failed to disclose
completely under the Act why it would change the APRs of
its cardholders, in violation of subsection 226.6(a)(2) of Reg-
ulation Z.6

   The Barrers do not argue that either the Agreement or the
Notice failed to disclose the APR, which their complaint puts
at 8.99% under the Agreement and 24.24% under the Notice.
Rather, they argue that Chase violated the Act by failing to
disclose “(1) the existence of the [adverse action re-pricing]
practice; (2) the credit factors that trigger an adverse action
re-price of a customer’s preferred APR; and (3) that informa-
tion obtained from a consumer’s credit report will be used for
this purpose.” Thus, the gravamen of the Barrers’ complaint
is that Chase did not disclose that if a cardholder’s credit
report revealed certain information, what Chase calls “risk
factors,” the APR might go up.

                                     A

   [6] Subsection 226.6(a)(2) states that “[t]he creditor shall
disclose to the [cardholder] . . . each periodic rate that may be
  6
    The complaint also claimed, in the alternative, that “to the extent Chase
has issued subsequent disclosures that purported to increase Plaintiffs’ and
the Class’ APR based on factors, events, or circumstances not reflected in
the original [Agreement], . . . such disclosures violate [the Act] and Regu-
lation Z in that they fail to accurately reflect the legal obligations of the
parties.” We do not reach this theory of liability, premised on allegedly
inaccurate disclosure in the Notice in violation of § 226.5(c), because we
find the Barrers’ first theory sufficiently states a claim.
                  BARRER v. CHASE BANK USA                  6001
used to compute the finance charge . . . and the corresponding
annual percentage rate.” There is, again, no dispute that Chase
disclosed the new APR after it had calculated it and before it
went into effect. Comment 11, however, indicates that more
is required. Most importantly, even if the creditor could not
know what a potential increased rate would be when it made
the original disclosures, “the creditor must provide an expla-
nation of the specific event or events that may result in the
increased rate.” 12 C.F.R. Pt. 226 Supp. I, par. 6(a)(2) cmt.
11. According to the Barrers, the risk factors that Chase con-
sidered under its adverse action repricing program are “spe-
cific events that may result in the increased rate,” and Chase
had to disclose them.

   Chase counters that the risk factors are too general to fall
under the meaning of “specific events.” It points to the exam-
ples of events comment 11 provides: late payments and credit
draws in excess of the credit limit. By contrast, Chase claims,
the reasons the complaint alleges Chase raised APRs are more
like judgment calls, assessments of a cardholder’s risk as the
credit history unfolds: outstanding credit loans on revolving
accounts that were “too high”; “too many recently opened
installment/revolving accounts”; debts on loan finance trades
that were “too high”; or an average time accounts had been
opened that was “too short.” Chase contends that it needs
flexibility to adjust the terms on which it offers credit accord-
ing to such risk factors, but that it cannot possibly disclose
every factor it might consider because the list is potentially
infinite and constantly changes as market conditions change.

   We recognize that, as we noted above, neither the Act nor
Regulation Z demands clairvoyance from creditors. The com-
ments specifically contemplate general reservation clauses,
and Regulation Z recognizes that subsequent events, specific
or not, can render inaccurate a creditor’s initial disclosures
and require new ones. See 12 C.F.R. Pt. 226 Supp. I, par. 9(c),
cmt. 1; 12 C.F.R. § 226.5(e). But this does not dispose of the
issue. At its core, the Barrers’ complaint alleges not that
6002                BARRER v. CHASE BANK USA
Chase adjusted APRs based on unknown future events that
forced it to reprice the credit it offered. Rather, the Barrers
specifically accuse Chase of having a pre-existing program, at
the time of the Agreement, whereby it planned to raise their
APR if certain risk factors appeared in their credit history.

   [7] But even if Chase did maintain such a program,7 the
language of comment 11 would not require its disclosure. We
agree with Chase that it must be able to adjust the price of
credit according to how risky it is to lend to a given card-
holder. Indeed, the risk of the cardholder—the likelihood he
or she will fail to pay off credit balances—is a basic element
in the price of credit. In this sense, “adverse action re-pricing”
is simply a way of describing the normal way a credit card
company prices its product. Not only will the facts that make
a cardholder risky emerge over time, but their importance to
Chase may vary as market conditions fluctuate. For example,
just a few years ago creditors were much less wary than they
appear to be today of cardholders and other loan recipients
who carry high levels of debt. As a credit card company’s
liquidity decreases, it may suddenly decide to curb the card-
holders to whom it had happily given the car keys only the
previous year. These decisions do indeed reflect judgments
that creditors make more than they do specific, triggering
events which creditors know in advance “may result in [an]
increased [APR].” 12 C.F.R. Pt. 226 Supp. I., par. 6(a)(2),
cmt. 11.

                                   B

   [8] Comment 11, however, does not exhaust the require-
ments that Chase had to meet. Regulation Z also requires that
creditors disclose any APR “that may be used to compute the
finance charge,” and that they do so “clearly and conspicuous-
ly.” 12 C.F.R. §§ 226.6(a)(2) & 226.5(a)(1) (emphasis added).
  7
    Because we are at the Rule 12(b)(6) stage, we take this allegation as
true.
                  BARRER v. CHASE BANK USA                 6003
The point is not that Chase had to disclose every factor rele-
vant to the APRs it imposed or that it reserved the right to
change the agreement; neither the Act nor Regulation Z
requires such disclosures. Moreover, we have recently
rejected the notion that credit card companies must disclose
more than what the laws actually require in order to avoid lia-
bility for some type of “bait-and-switch.” See Hauk, 552 F.3d
at 1122 (“We hold that a creditor’s undisclosed intent to act
inconsistent with its disclosures is irrelevant in determining
the sufficiency of those disclosures under sections 226.5,
226.6, and 226.9 of Regulation Z.”). Rather, the question is
what disclosures Chase must have made in order to disclose
clearly and conspicuously what Regulation Z does demand:
namely, any APR “that may be used.” 12 C.F.R. § 226.6(a)(2)
(emphasis added).

                               1

   [9] We have yet to determine the meaning of the word
“may” in subsection 226.6(a)(2), but one of our sister circuits
has done so. In Rossman v. Fleet Bank, the Third Circuit
rejected the argument that the word means “might ever be” at
some future date, because Regulation Z explicitly contem-
plates that creditors will make changes to an agreement “that
do not affect the accuracy of a previous disclosure.” 280 F.3d
at 392. (citing provisions of Regulation Z and the Act)
(emphasis omitted). Instead, it held that “may” means “is per-
mitted to” by the agreement at issue. Id. at 393. Rossman
pointed to the Board’s comment, albeit in reference to a dif-
ferent subsection of the regulation, that “[t]he disclosures
should reflect the credit terms to which the parties are legally
bound at the time of giving the disclosures.” Id. at 391 (quot-
ing 12 C.F.R. Pt. 226, Supp. I § 5(c), cmt. 1) (emphasis
added). In light of that observation, the Third Circuit con-
cluded that “may” in this context connoted permission, not
possibility. Id. at 393.

   [10] We are persuaded by this interpretation. Although our
recent Hauk opinion disagreed with the reasoning of Rossman
6004                 BARRER v. CHASE BANK USA
in some respects, see Hauk, 552 F.3d at 1121-22, it confirmed
that “our circuit has focused on subsection 226.5(c)’s require-
ment that disclosures ‘reflect the terms of the legal obligation
between the parties,’ ” id. at 1121. Our interpretation of sub-
section 226.6(a)(2) is consistent with full disclosure of con-
tractual terms. Creditors, including Chase, therefore violate
subsection 226.6(a)(2) when they do not disclose in an agree-
ment any APR that such agreement permits them to use.

                                     2

   Chase argues that the Agreement permitted it to change the
Barrers’ APR on the basis of risk factors that it discovered in
their credit history, by virtue of the reservation of the right to
change terms (“change-in-terms provision”). Furthermore,
Chase contends that the disclosure of that contractual right,
coupled with the disclosure that Chase would periodically
review credit history, meets its disclosure obligation under
subsection 226.6(a)(2).

                                     a

   [11] We are persuaded that Chase adequately disclosed the
APRs that the Agreement permitted it to use simply by means
of the change-in-terms provision. That provision reserved
Chase’s right to change APRs, among other terms, without
any limitation on why Chase could make such a change. The
provision thus disclosed that, by changing the Agreement,
Chase could use any APR, a class of APRs that logically
includes APRs adjusted on the basis of adverse credit infor-
mation. Apart from the gloss of Comment 11, neither the Act
nor Regulation Z require Chase to disclose the basis on which
it would change or use APRs.8 Therefore the failure to dis-
   8
     The Barrers point to the language of subsection 226.6(a) requiring dis-
closure of “[t]he circumstances under which a finance charge will be
imposed and an explanation of how it will be determined.” But that phrase
is immediately followed by the words, “as follows,” and a list of specific
requirements. Thus, only the items enumerated in the list must be dis-
closed. Disclosure of the basis for increases in a periodic rate (such as an
APR) is not on that list.
                     BARRER v. CHASE BANK USA                           6005
close the reason for the change to the Barrers’ APR—adverse
credit information—and that Chase would look up their credit
history to acquire that information does not undermine the
adequacy of Chase’s disclosure.9
  9
   Although we construe the Act liberally in favor of the consumer, see
Jackson, 890 F.2d at 120, this does not protect against every sharp credit
practice. We have emphasized that the Act “is only a disclosure statute
and does not substantively regulate consumer credit but rather requires
disclosure of certain terms and conditions of credit.” Hauk, 552 F.3d at
1120 (internal quotation marks omitted). The Barrers might argue that a
general change-in-terms provision is an inadequate disclosure of the terms
of an agreement, because it fails to communicate the implications of those
terms. Such a characterization, however, is neither natural nor compelled.
We decline to adopt it because it amounts to a challenge to a substantive
term in the agreement, namely the general change-in-terms provision, for
such provisions would be effectively illegal if creditors had to specify the
general circumstances under which they anticipated changing terms.
   Furthermore, we recently concluded that “a creditor’s undisclosed intent
to act inconsistent with its disclosures is irrelevant in determining the suf-
ficiency of those disclosures under section[ ] . . . 226.6 [of Regulation Z].”
Id. at 1122. If that is true, it would be odd to say that a creditor’s undis-
closed intent to pursue a particular a course of action consistent with its
disclosures, though somewhat more specific than the general policy that
was disclosed, was not only relevant to determining the sufficiency of
those disclosures, but actually causes them to violate section 226.6.
   Finally, Judge Graber worries that our interpretation would open the
door for creditors to adjust the terms of a credit agreement for such bizarre
reasons as the color of the cardholder’s hair. See Partial Dissent at 6008.
We do not have such a freakish fact pattern before us, but we doubt that
Regulation Z would permit a creditor to use a general change-in-terms
provision to punish a cardholder on any whim whatsoever. Recall that
Comment 11 requires the disclosure of the “specific event or events that
may result in the increased rate.” 12 C.F.R. Pt. 226 Supp. I, par. 6(a)(2)
cmt. 11; see also supra, at 6000-02. Our conclusion that Comment 11 does
not require the disclosure of risk-based pricing rests, in part, on the fact
that pricing credit on the basis of cardholder risk is how credit card com-
panies normally do business. Clearly, the same could not be said for pric-
ing credit on the basis of hair color or any other peccadillo that might
offend some over-punctilious creditor.
6006             BARRER v. CHASE BANK USA
                              b

   [12] Even so, such disclosure must be clear and conspicu-
ous. 12 C.F.R. § 226.5(a)(1); 15 U.S.C. § 1632(a). Neither the
Act nor Regulation Z define clarity and conspicuousness in
this context. The Staff Commentary explains only that “[t]he
clear and conspicuous standard requires that disclosures be in
a reasonably understandable form.” 12 C.F.R. Pt. 226, Supp.
I, par. 5(a)(1), cmt. 1. The same standard for clarity and con-
spicuousness also appears in other areas of commercial law,
which matters because “[w]hen a federal statute leaves terms
undefined or otherwise has a ‘gap,’ we often borrow from
state law in creating a federal common law rule.” See Am.
Gen. Fin., Inc. v. Basset (In re Bassett), 285 F.3d 882, 884-85
(9th Cir. 2002). Under the Uniform Commercial Code, a term
is considered conspicuous when it is “so written, displayed, or
presented that a reasonable person against which it is to oper-
ate ought to have noticed it.” U.C.C. § 1-201(b)(10). We bor-
rowed from this definition in the context of the Bankruptcy
Code, which also requires certain disclosures to be “clear and
conspicuous” without defining that term, concluding that
“conspicuousness ultimately turns on the likelihood that a rea-
sonable person would actually see a term in an agreement.”
Bassett, 285 F.3d at 886.

   [13] Clear and conspicuous disclosures, therefore, are dis-
closures that a reasonable cardholder would notice and under-
stand. No particular kind of formatting is magical, see Basset,
285 F.3d at 886, but, in this case, the document must have
made it clear to a reasonable cardholder that Chase was per-
mitted under the agreement to raise the APR not only for the
events of default specified in the “Finance Terms” section, but
for any reason at all.

  [14] Although “[w]e decide conspicuousness as a matter of
law,” Basset, 285 F.3d at 885, we need not promulgate here
a code of conspicuousness. It is enough to observe that the
change-in-terms provision appears on page 10-11 of the
                  BARRER v. CHASE BANK USA                 6007
Agreement, five dense pages after the disclosure of the APR.
It is neither referenced in nor clearly related to the “Finance
Terms” section. This provision, as part of the APRs allowed
under the contract, is buried too deeply in the fine print for a
reasonable cardholder to realize that, in addition to the spe-
cific grounds for increasing the APR listed in the “Finance
Charges” section, Chase could raise the APR for other rea-
sons.

  [15] Therefore, the Barrers have stated a claim because
Chase cannot show that, as a matter of law, the Agreement
made clear and conspicuous disclosure of the APRs that
Chase was permitted to use.

                              IV

  For the foregoing reasons, we reverse the district court’s
grant of Chase’s motion to dismiss for failure to state a claim
and remand for further proceedings.

  REVERSED and REMANDED.



GRABER, Circuit Judge, concurring in part and dissenting in
part:

   I concur in the opinion, with the exception of Parts III.A
and III.B.2.a. To those portions of the opinion, I respectfully
must dissent. Display (e.g., size and font of the print) and
placement are not the only defects in the Chase Agreement.
Rather, in the procedural posture of this case, I would con-
clude that the disclosures are not only unclear and inconspicu-
ous, but also substantively insufficient under Regulation Z. 12
C.F.R. §§ 226.6(a), 226.5(a)(1), 226.5(c).

  As the majority correctly observes, the Truth in Lending
Act (“TILA”) is designed “to assure a meaningful disclosure
6008              BARRER v. CHASE BANK USA
of credit terms so that the consumer will be able to compare
more readily the various credit terms available to him and
avoid the uninformed use of credit.” 15 U.S.C. § 1601(a). But
the majority’s interpretation of Regulation Z’s requirements
allows Chase to circumvent that goal. The majority opinion
concludes that Chase’s reservation of the right to change the
terms of the Agreement, standing alone, constitutes adequate
disclosure of every possible Annual Percentage Rate (“APR”)
it may use, because it discloses that Chase has a right to
change the terms of the Agreement at any time, without limi-
tation. Maj. op. at 6004-05. In other words, Chase can raise
the Barrers’ APR for any reason, however bizarre or unex-
pected, without informing them that it intends to do so. For
example, under the majority’s opinion, Chase has adequately
disclosed that it had a preexisting plan to raise the Barrers’
APR to 50% if they dye their hair red. The majority opinion
would allow that result simply because Chase included in the
Agreement an unrestricted change-in-terms provision.

   Chase has little or no incentive to limit its own ability to
change a customer’s APR or to inform its customers of its
plans. By failing to read Regulation Z in a manner that
requires credit card companies to give meaningful informa-
tion to customers, the majority effectively has let the fox
guard the henhouse and has disregarded the purpose of TILA.

   I would hold instead, at the pleading stage, that Chase’s
disclosures were not necessarily substantively adequate as a
matter of law. As the opinion notes, we must take as true the
allegations of the complaint, because the case comes to us on
a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6). Maj. op. at 6002 n.7. Therefore, it is a given for pur-
poses of our decision that Chase maintained a pre-existing
program, at the time the Barrers entered into the Agreement,
under which Chase planned to raise the Barrers’ APR if cer-
tain specific risk factors appeared in their credit history: an
unfavorable credit-to-debt ratio, a large number of lines of
credit, or other adverse information. Those facts, which we
                     BARRER v. CHASE BANK USA                          6009
must deem true, required Chase to disclose—truthfully and
conspicuously—that it maintained a pre-existing program
under which it would raise the Barrers’ APR if Chase learned
of certain specific risk factors, including negative credit
events that occurred before the extension of credit.1 It did not
do so.

   Although the majority rests its conclusion about the sub-
stantive adequacy of the disclosure solely on the change-in-
terms provision, maj. op. at 6004, I am uncertain that even a
combination of the change-in-terms provision and the credit
history monitoring term would suffice to meet Regulation Z’s
standards. Even if those two terms had appeared together, in
large bold print, it is not clear to me that the combination
would have informed the Barrers adequately that Chase could
change their APR on the basis of particular types of adverse
information in their credit history reports. That is, assuming
that the Barrers read and understood each provision correctly,
I doubt that they could be expected to put both terms together
to reach the understanding that Chase and the majority deem
obvious: that Chase could raise their APR based on informa-
tion it receives from routine credit monitoring.2

  In addition to ensuring fairness and allowing for compari-
son shopping, one reason to require disclosure is to permit
  1
     The allegation that “Chase . . . uses [information from consumer credit
reports] to deem customers in default, based on credit events that existed
prior to the extension of credit,” Complaint at ¶ 24, is particularly trou-
bling because it suggests that Chase knew of negative credit events that
would result in its raising the Barrers’ APR, even before it extended credit
to them at a lower rate.
   2
      The requirement that I am suggesting would not be onerous. Here is
one illustration: “Chase may raise your interest rate if it learns, from
reviewing consumer credit reports about you, that you have opened a large
number of credit accounts, that you are carrying a large amount of debt,
or that your credit history is less than fully satisfactory in any other way,
even if the credit reports concern events that happened before you signed
this Agreement.”
6010             BARRER v. CHASE BANK USA
consumers to conform their behavior to the information—for
example, to refrain from dyeing their hair red or from opening
additional credit card accounts, so as to avoid an increase in
their APR. In my view, the content of the Chase Agreement
is too vague and general to allow a reasonable, average con-
sumer to understand the terms and adjust his or her behavior
accordingly. Cf. Hauk v. JP Morgan Chase Bank USA, 552
F.3d 1114, 1119 (9th Cir. 2009) (holding that an explanation
was adequate when it disclosed specifically that the APR may
change “if any minimum payment on any loan or account” is
not made by the payment due date). Chase’s broad reservation
of rights, without more, cannot fulfill that purpose.

   Of course, the evidence may demonstrate that there was no
pre-existing program as alleged, in which case there was noth-
ing to disclose. But we cannot make that assumption because
we must deem the Barrers’ allegations to be true. If there were
such a program as alleged, its content would have to be dis-
closed both truthfully and conspicuously. I therefore dissent
from Parts III.A and III.B.2.a.
