State “Holiday Statutes” Preempted by National Bank Act and therefore cannot Support Class Action Claims alleging Unfair Business Practices Against Bank of America for Charging Late Fees or Interest for Credit Card Payments Posted on the First Day Following a State Holiday California State Court Holds
Plaintiffs filed a class action against Bank of America, a national bank, now known as FIA Card Services, N.A., which is also a national bank, alleging violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint, brought on behalf of credit card holders, asserted that California and Arizona have “holiday statutes” that “essentially state that whenever a legal or contractual act is required to be performed on a holiday, the act may be performed on the next business day without any adverse consequence,” but that the Bank violated these statutes by “charging late fees or interest for credit card payments ‘posted on the first business day after a Holiday due date, when such fee[s] or interest would not have been due if the payment was posted on the Holiday due date.’” Miller v. Bank of America, N.A. (U.S.A.), 170 Cal.App.4th 980, 88 Cal.Rptr.3d 723, 724-25 and n. 1 (Cal.App. 2009). The third amended class action complaint alleged three separate violations of the UCL, “each of which aligns with one of the three holiday statutes” at issue in the class action. Id., at 725. The class action sought to enjoin the Bank from further violations of the statutes, and sought also restitution for the members of the class. Id. The trial court sustained the Bank’s demurrer to the class action complaint, concluding that the state laws were preempted by the National Bank Act (NBA), id., at 724-25. The question on appeal was “whether these state holiday statutes apply to a national bank’s credit card payment due dates.” Id. The California Court of Appeal held that they do not, and affirmed dismissal of the class action.
The Court of Appeal began its analysis with a detailed discussion of the principles governing preemption. See Miller, at 725 et seq. It concluded that the “critical” issue in this case was whether the legal duty created by the state law claim constitutes a requirement or prohibition of the type the NBA preempts, id., at 726 (citations omitted). Based on its analysis, see id., at 726-28, the appellate court held that the holiday statutes were preempted by the NBA because they would effectively change the payment due date thereby impacting the “schedule for repayment of principal and interest” set by a national bank, id., at 727. As the Court of Appeal explained at page 727, “Such interference is directly contrary to 12 C.F.R. section 7.4008, subdivision (d) which provides that a national bank may set the schedule for repayment on non-real estate loans [and set the payments due] without regard to state law limitations.” In so holding, the Court rejected plaintiffs’ argument that the Bank was “entirely free to set both the schedule for repayment and the payment due” because applying the holiday statutes would simply affect the date on which a payment is credited to the account. Id., at 727-28. The appellate court further rejected plaintiffs’ argument that the holiday statutes fell within the preemption exemption in the NBA for state “contract” laws. See id., at 728-30. Accordingly, it affirmed the trial court’s dismissal of the class action complaint on the grounds of preemption, id., at 730.
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