INJUNCTION EXTENDED AGAINST CALIFORNIA MINIMUM PAYMENT LAW
A stipulation extending the permanent injunction in American Bankers Association v. Lockyer was signed on Monday, January 13, 2003, in the U.S. District Court for the Eastern District of California. In Lockyer, several federally chartered banks and banking trade associations challenged the enforceability of the California Minimum Payment Law, California Civil Code Section 1748.13A, and were granted a permanent injunction prohibiting enforcement of the statute against federally chartered credit card issuers on December 23, 2002. The stipulation states that the permanent injunction issued by the court on December 23, 2002 will now apply to all non‑federally chartered card issuers.
The California Minimum Payment Law requires that certain language and information regarding minimum payments be included on billing statements that credit card issuers provide to their cardholders. The Law was challenged on the basis of (i) federal preemption (for national banks, federal savings associations/savings banks and federal credit unions) and (ii) a violation of the so‑called “dormant Commerce Clause” ( i.e., that the law unconstitutionally places an undue burden on interstate commerce). The court determined that the Law was preempted with regard to federally chartered federal savings banks, national banks and credit unions on December 23, 2002. The stipulation provides that “[t]he injunction . . . shall apply with respect to all non‑federally chartered Card Issuers so long as said injunction remains in effect with respect to federally chartered Card Issuers” and “Plaintiffs’ claims under the Commerce Clause and 42 U.S.C. § 1983 shall accordingly be dismissed as moot.”
It appears from the broad language in the stipulation, as well as conversations with plaintiffs’ attorneys involved in the final negotiations on the stipulation, that the stipulation is meant to extend the injunction to prohibit enforcement of the Law with respect to all non‑federally chartered credit card issuers, including state chartered financial institutions and non‑bank lenders such as retailers and finance companies. However, there may be a serious issue with regard to the validity/constitutionality of the order insofar as it covers non-parties to the case. Insofar as the order has been organized to state in effect that the California attorney general is enjoined from enforcing the Law against anyone who was not already exempted via the court’s December 23, 2002 decision and order, the order may be valid/constitutional. But California consumers do and California legislators may have standing to challenge the stipulation and order regarding non‑parties. Whether either will do so is unknown. Finally, as of January 21, 2003, the California attorney general’s office has not decided whether it will appeal the December 23, 2002 decision.