Denny Walsh reports on U.S. District Judge Frank C. Damrell Jr’s decision yesterday permanently barring enforcement of a new California law forcing credit card companies to warn their customers how long it will take and how much more it will cost to pay their bills with minimum payments. The court ruled that federal laws governing the operation of financial institutions pre-empt state laws in this area.
The Legislature passed the law last year, and it was scheduled to take effect on July 1. Led by the American Bankers Association and the National Association of Federal Credit Unions, card issuers sued on May 24. In an order on June 28, Damrell temporarily put enforcement on hold.
The statute required two messages be displayed on the first page of a cardholder’s statement, unless the issuer required a minimum payment of at least 10 percent of the balance or did not impose finance charges.
The first message would have warned that minimum payments increase interest and the time it takes to retire a debt.
There were two options for a second message.
One would have provided examples for three balance amounts at the interest rate and minimum payment applicable to the account. Additionally, a toll-free number would have been listed for cardholders wanting more personalized information.
The second option was to provide the cardholder with written, “customized” information regarding interest and duration of debt. Along with that would have been a referral to a credit counseling service or the number for the National Foundation for Credit Counseling.