Supreme Court refuses to block fees for paying late on bank credit cards

January 12, 1993|By Lyle Denniston | Lyle Denniston,Washington Bureau

WASHINGTON -- Efforts to save credit card users from having to pay as much as $858 million a year in extra fees when they fall behind in their payments failed in the Supreme Court yesterday.

Without comment, the court left intact a lower court ruling that bars states from using consumer-protection laws to rule out or limit late-payment fees for holders of bank credit cards.

In another action, the court indicated again that it is not ready to get back into the controversy over states' attempts to limit women's right to abortion. In an Oklahoma case, the justices turned aside an attempt to assure abortion foes that they can use state ballot measures to enact tough new restrictions on abortion.

The court's action in the credit card case may scuttle widespread attempts to curb banks' rising collection of extra fees from late payers. Eight out of 10 households in the country have one or more credit cards, and an increasing number of card companies are charging late fees in addition to the interest they charge on any debt outstanding on the books.

Credit card issuers received $858 million in late fees in 1991.

Maryland is one of 32 states, along with Washington, D.C., and Puerto Rico, that either set ceilings on late fees or forbid them completely. Maryland has a law that limits the amounts that may be charged. Most if not all of those limitations probably cannot now be enforced against banks that issue credit cards in the wake of yesterday's Supreme Court action on a case from Massachusetts.

In that case, a federal appeals court ruled in August that a 1980 federal law, permitting national banks to charge late fees to credit card borrowers, overrides any state consumer-protection law used against late fees charged by state-chartered banks.

A number of the nation's biggest credit card companies are banks that are licensed by states, such as Delaware and South Dakota, that impose few restrictions on those companies' operations and allow them to impose late-payment penalties.

Massachusetts tried to block late fees charged by a Delaware-chartered bank, Greenwood Trust Co., which issues the Discover card. About 100,000 cardholders in Massachusetts use that card, and the state began threatening Greenwood Trust in 1989 with legal action if it did not stop charging late-payment fees.

State officials contended that such fees violated Massachusetts' consumer-protection law. Greenwood Trust countered that effort by going to court to get the state law nullified, at least as far as it might apply to fees for bank credit cards.

The appeals court treated late fees the same as any other interest charged on bank borrowings. It said the 1980 law written to free national banks to charge any interest allowed by state banking laws applies across the board, to state-chartered as well as national banks.

The state of Massachusetts, supported by Maryland, 27 other states and consumers' groups, took the case on to the Supreme Court, saying the appeals court ruling "will encourage more and more lenders to flout long-standing state consumer protection laws."

The justices, as usual, gave no reason for their decision to bypass that case.

In the court's new action on abortion rights, the justices refused for the third time in recent weeks to grant review of an abortion case. Each of the cases has involved a plea for the justices to spell out further the power of states to limit abortion rights, under the court's ruling last June partly reaffirming the right created by Roe vs. Wade in 1973.

The Oklahoma Supreme Court, the first state court to apply the June decision, struck down a proposed ballot measure that anti-abortion forces wanted to put before the states' voters last November. That measure, going far to outlaw abortion in that state, was one of three abortion ballot issues that had been readied for the November elections; others were in Maryland and Arizona.

Sponsors of the Oklahoma proposal took the issue to the Supreme Court.

Other Supreme Court cases

The Supreme Court, returning from a four-week recess yesterday, turned down a long list of new appeals yesterday. These were among the more significant results:

Gun for hire. The court left intact a $4.4-million jury verdict against Soldier of Fortune magazine for running a "personal" ad by a Vietnam veteran offering gun-for-hire services. A businessman in Atlanta responded to the ad in order to hire an assassin to kill his business partner. The survivors of the murdered man sued, saying that the magazine was responsible because it accepted an ad that proposed a crime. A federal appeals court ruling upheld the verdict, saying publications must not take ads that pose too high a risk that crime will result -- a ruling strongly protested by publishing organizations as a broad threat to their freedom. The magazine said the verdict might put it out of business; it has stopped accepting personal ads.

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