High Court Lets Ruling on Credit Cards Stand

The U.S. Supreme Court on Monday let stand a ruling that may lead to limits on the fees that some credit card issuers can charge.

The justices, without comment, refused to consider an appeal by a financial services arm of General Electric Co., which is fighting a class-action lawsuit by a Louisiana consumer.

The appeal centered on a federal trial judge’s conclusion that GE’s Monogram Credit Card Bank of Georgia isn’t a “state bank” as defined in the Federal Deposit Insurance Act.

That’s an important distinction because state banks can export high fees and rates allowed in their home states to customers who live in states that cap those charges.

The high court’s decision is a victory for Patricia Heaton, a local government employee who lives in New Orleans. Heaton contends Monogram illegally imposed an $18 fee for late payments, higher than the $15 Louisiana cap, and interest several percentage points above the 18% Louisiana ceiling.

U.S. District Judge Carl Barbier in New Orleans concluded that Monogram wasn’t a state bank and thus wasn’t allowed to export its higher fees to a state that limited such charges.

The ruling’s effect on credit card issuers may be limited, however. The dispute affects only pure credit card banks, not traditional banks that also issue credit cards. Furthermore, many credit card issuers are chartered as national banks rather than state banks, and national banks apparently won’t be affected by the ruling, said James Clark of the California Bankers Assn.

California caps late fees but only for banks headquartered in the state, Clark said. California does not cap interest rates.

Nevertheless, the Federal Deposit Insurance Corp. said in a 1999 court filing that the ruling “may open the floodgates of litigation” by consumers against certain banks. The Monogram case itself raises the prospect of a multibillion-dollar verdict against the financial services company, said its lawyer, Carter G. Phillips.