2012-06-22 "'Convenience check' law found to intrude on banks" by Bob Egelko from "San Francisco Chronicle"
A California law that requires credit card companies to publish finance charges and other conditions alongside the preprinted "convenience checks" they offer to customers is an illegal intrusion into the operations of national banks, the state Supreme Court has ruled.
Nationwide banks that issue credit cards are regulated by the federal government, which imposes no such disclosure requirements on the checks or accompanying documents. In a unanimous ruling Thursday, the court said the state law interferes with national banks' broad power, conferred by an 1864 federal statute, "to conduct the business of banking."
A lawyer for an Orange County man who tried to enforce the California law against his credit card company said Friday that the ruling would thwart any meaningful state regulation of national banks and would have "disastrous consequences for California consumers." Attorney Michael Vachon said he may ask the U.S. Supreme Court to review the case.
The company, FIA Card Services, said the ruling follows "well-established and long-standing" U.S. Supreme Court precedents on the power of national banks.
The state law, which took effect in 2000, applies to the checks that banks send to credit card customers to use as instant credit. Vachon said banks add interest payments to the checks immediately, without the interest-free grace period allowed on credit card bills, along with a transaction fee.
The law requires banks to attach a statement to each check declaring the interest rate and finance charges. Vachon's client, Allan Parks, sued his credit card issuer, then called MBNA America Bank, in 2004 after writing several checks to buy gifts and pay bills and incurring finance charges that he said had not been disclosed according to state law.
A state appeals court refused to dismiss the proposed class-action suit, saying the California law merely required accurate disclosures and did not impair banks' ability to make loans by issuing convenience checks. The ruling conflicted with a federal appeals court's 2008 decision striking down the state law in another case, leaving the law enforceable only in state courts.
In Thursday's ruling, however, the state's high court said the California law imposed substantial requirements on banks by requiring specific disclosures and prescribing their content and format.
The lending authority granted by federal law "would be significantly impaired if national banks had to comply with a diverse or duplicative patchwork of local disclosure requirements," said Justice Goodwin Liu in the court's decision.
The ruling in Parks vs. MBNA, S183703, can be viewed at [http://www.courts.ca.gov/opinions/documents/S183703.PDF].