The California Court of Appeal held that a California statute limiting payoff demand statement fees was preempted by federal law as it applied to a federal savings association. Lopez v. World Sav. and Loan Ass’n, 105 Cal. App. 4th 729 (2003). Class action plaintiffs challenged the practice of a federal savings and loan association of charging a fee for transmission of a payoff demand statement in excess of the amount permitted under California Civil Code Section 2943. Plaintiffs alleged that charging the fee in violation of the California statute was an unfair, deceptive and unlawful business practice in violation of California’s Unfair Competition Act. The defendant sought summary judgment on the basis of federal preemption. The court stated that the Office of Thrift Supervision (“OTS”) was authorized by Congress to promulgate 12 C.F.R. § 560.2 and that federal regulations have no less preemptive effect than federal statutes. The court found that Section 560.2 preempts all state laws purporting to regulate any aspect of the lending operations of a federally chartered savings association, whether or not the OTS has adopted a regulation governing the precise subject of the state provision. Thus, the court found that Section 560.2 broadly preempts state restrictions on loan‑servicing fees including payoff demand fees specifically dealt with in the California statute. As the statute limiting payoff statement demand fees was preempted, the court held that any claim under the Unfair Competition Act based on a violation of the California statute was also preempted.

Mike Tomkies and Elizabeth Anstaett