Magazine article American Banker

ABA Weighs in against Pa. Ban on Interstate Late Card Fees

Magazine article American Banker

ABA Weighs in against Pa. Ban on Interstate Late Card Fees

Article excerpt

WASHINGTON -- The American Bankers Association urged a federal appeals court Monday to uphold a decision permitting banks to "export" late fees, even to customers in states that don't permit such charges.

Failure to do so could destroy credit competition and hamper the industry's ability to engage in interstate lending, argued Michael F. Crotty, the ABA's general counsel for litigation, in a brief.

The case centers on a dispute between Delaware, which allows banks to charge credit card late fees, and Pennsylvania, which-does not allow late fees on cards. Pennsylvania does allow late charges on other unsecured personal loans.

The ABA contends there is no difference between credit card loans and unsecured loans. Therefore, if Pennsylvania allows some institutions to collect late fees, out-of-state banks also should be allowed to collect them, Mr. Crotty said.

Pennsylvania officials argue that the laws apply to interest rates, not fees,

This is the second time this battle has weaved its way through the federal courts. In 1992, the First Circuit struck down a Massachusetts law prohibiting banks from charging late fees on credit cards.

The Supreme Court refused to hear an appeal, which essentially made the late fees legal in Massachusetts, Rhode Island, Maine, and New Hampshire. But federal courts in other states are not bound by the decision.

Heading to Court

That set up the Pennsylvania challenge, which is pending before the third circuit.

Mr. Crotty wrote in the brief that several. …

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