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Hunter v. Greenwood Trust Co.

Decided: April 22, 1994.


On appeal from the Superior Court of New Jersey, Law Division, Camden County.

Before Judges Shebell, Long and Landau.


The opinion of the court was delivered by LONG, J.A.D.

Plaintiff, James M. Hunter, here appeals from the trial Judge's dismissal of the class action he filed against defendant, Greenwood Trust Company, to invalidate the late charges imposed by defendant on his credit card account.


Greenwood is a federally insured bank, chartered under Delaware law, located in New Castle, Delaware. One of the banking services provided by Greenwood is the Discover Card, which cardholders use to charge items and to make purchases by borrowing money from Greenwood on an open-ended credit basis. Greenwood issues its Discover Card to credit card applicants pursuant to a Cardmember Agreement which cardholders receive when they obtain their credit cards.

Among numerous other provisions, the Cardmember Agreement specifies the annual percentage rate finance charge which Greenwood assesses against the outstanding monthly debt balance on its cardholders' accounts. The Cardmember Agreement also provides that if a cardholder fails to make a specified minimum payment on the outstanding debt balance within twenty days of the payment due date stated in a monthly bill, a late charge of ten dollars will be assessed against the cardholder's account. The late charge is added to the cardholder's outstanding balance and the annual percentage rate finance charge is applied to that outstanding balance in subsequent billings. The cardholder may incur multiple ten-dollar late payment charges on his or her account for failure to make the minimum payment during several billing cycles. Greenwood issues its Discover Card to applicants throughout the United States. More than 10,000 residents of New Jersey have received these cards.

Plaintiff is a New Jersey resident who received his Discover Card from Greenwood in 1985. On at least three occasions between 1985 and 1991, plaintiff did not pay the minimum monthly amount specified on his Discover Card bill. Consequently, he incurred at least three ten-dollar late payment charges over the years and those charges were added to his outstanding debt balance in subsequent billings.

Plaintiff filed a complaint, later amended to class action form, which alleged that the ten dollar late charge Greenwood imposes for a cardholder's failure to pay the minimum monthly amount on an outstanding debt balance violates New Jersey statutory law, specifically provisions of the Retail Installment Sales Act, N.J.S.A. 17:16C-50 and -54 and the Consumer Fraud Act, N.J.S.A. 56:8-2 and -19. Plaintiff also alleged violations of New Jersey common law, specifically breach of contract and conversion, based upon the illegally imposed late charges.

Greenwood moved to dismiss the amended complaint for failure to state a claim upon which relief could be granted. In so moving, it asserted that plaintiff's state law based claims were preempted by section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDA"), Pub. L. No. 96-221, 94 Stat. 132 (codified as section 27 of the Federal Deposit Insurance Act (12 U.S.C.A. § 1831d)) (hereinafter section 521).

The trial Judge, Judge Fratto, ruled that by enacting section 521 Congress intended to preempt "the entire area" covering interest rates and the assessment of late payment charges by state-chartered, federally insured banks like Greenwood. Accordingly, he entered an order dismissing plaintiff's amended complaint.

Plaintiff appeals, contending that section 521 preempts state interest laws but excludes late charges from its preemptive scope. He also urges that, even if preemption is applicable to his state statutory claims, his state common law claims should not have been dismissed. We have carefully reviewed this record in light of these contentions and have concluded that there is no warrant for our intervention.


In 1864, Congress enacted the National Bank Act (NBA) ch. 106, 13 Stat. 99 (codified, as amended, in scattered sections of the United States Code). Section 85 ...

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