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Current Events - 01/13/2003

AB865 "minimum payment" law and litigation

In 2001, the California Legislature passed AB 865, which imposed certain obligations on credit card issuers intended to protect cardholders who make only minimum payments on credit card balances. The successful lawsuit over AB 865, decided last month, relieves federal savings and loan associations, national banks, and federal credit unions from complying with that law. While CBA did not participate in that challenge, we did work closely with the ABA to ensure that arguments were made to protect state-chartered institutions if the plaintiffs prevailed. Unfortunately, the court did not feel compelled to protect state-chartered card issuers.

Unless the decision is amended, only state chartered bank issuers (and agents) would be subject to AB 865 as of January 13, 2003 when the decision becomes final. CBA has worked with the Department of Financial Institutions (DFI) and the Attorney General's Office to explore ways to correct the disparity. Initial indications are that the AG, recognizing the policy implications of the decision, will cooperate in a request to the court to exempt non-federally chartered issuers from the law.

This case and other recent decisions involving federal preemption raise the important issue of maintaining parity for state-chartered institutions. While federal banking agencies are able to shield their constituent institutions from conflicting state laws through the doctrine of federal preemption, state institutions often have no legal basis to challenge state or local laws and regulations affecting them.

The ineffectiveness of the state's "wild card" statute, which allows the DFI to issue emergency regulations in order to correct disparities between national and state chartered banks, is amply demonstrated by the fact it was not applicable in any of the recent major preemption decisions, including the ATM surcharge case. Therefore, CBA will support legislation to strengthen the state's parity law. Such legislation would help preserve the dual banking system, and ensure that the state's banking authority can correct any imbalance as between state and federal banks, and thereby preserve a level playing field for all banks.

Monday Courier goes electronic

In an effort to respond to the needs of our members, CBA is preparing to offer its weekly communications piece, the Monday Courier, as an electronic document sent via e-mail to its members. We anticipate sending the first electronic version to our members the first week of February. If you would like to receive only a hard copy and not an electronic copy of Monday Courier, please e-mail Anissa Yates at ayates@calbankers.com no later than January 27. Those who send an e-mail will have their names removed from our e-mail distribution list and will continue to receive Monday Courier via regular mail. If you have any questions, please contact Anissa Yates at 916/441-7377 ext. 208.

Flood insurance

As of the printing of this Monday Courier, it is widely expected that Congress will pass the flood insurance proposal before it. Leadership from both sides have indicated that the vote is expected to pass - in fact, the House expects a unanimous vote.

Small business

OMB has informed the appropriators that $40 million remains in the Star program and that it will expire on January 10. OMB further stated that the funds can be "reprogrammed" for 7(a). All it requires is the consent of the appropriations committees. Only the Senate Committee signed off on this "reprogramming" last year. We will have update in the Advocacy Alert due to our members on January 20.

Grassroots meetings

The following meetings have been scheduled between CBA members and their elected officials. If you would like more information on these meetings, or would like to participate in any of the meetings, please contact Mary Boruff at (916) 441-7377, ext. 207. If you are not available, please consider sending an officer from your bank.

* Freshman legislator