Magazine article American Banker

Top Calif. Court Says Out-of-State Card Banks Can Ignore Fee Limits

Magazine article American Banker

Top Calif. Court Says Out-of-State Card Banks Can Ignore Fee Limits

Article excerpt

WASHINGTON - The California Supreme Court gave out-of-state credit card banks a major victory Friday, ruling that they can ignore the Golden State's restrictions on fee and service charges.

Lawyers familiar with the dispute said the 5-2 ruling could help the credit card industry in similar cases pending before three other state supreme courts and one federal appeals panel.

"This is a tremendous step forward for the banking industry," said Alan

S. Kaplinsky, a partner at Philadelphia's Ballard, Spahr, Andrews & Ingersoll. "It is by far the best opinion written for the industry."

"It is so well done and so well reasoned, it should show the way for other courts," he added.

Acting California Chief Justice Stanley Mosk wrote that the National Bank Act gives a credit card bank's home state the power to restrict late fees and service charges.

Out-of-state banks are free to ignore more restrictive California laws,

the court said.

Bankers fear that the courts will force them to follow fee and service-

charge limits set by each state and territory.

The administrative burden could sink some national credit card operations, said Michael Crotty, deputy general counsel at the American Bankers Association. It also would increase costs for the banks, which would probably pass on the increase as higher interest rates.

Bankers have challenged fee-limit laws in several states. Cases are pending before the federal appeals court in Philadelphia and the Pennsylvania, Colorado, and New Jersey supreme courts. The industry has won

on the lower-court level except in Pennsylvania. …

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