SACRAMENTO, Dec. 24 (UPI) -- Californians will be on their own next year when they sit down to figure out how long it will take them to pay off their Christmas credit card bills.
A federal judge in Sacramento blocked enforcement of a state law that requires credit card statements to include a calculation of how long it will take for a consumer to pay off their balances using only the minimum monthly payments.
U.S. District Court Judge Frank C. Darmell said in a 44-page written ruling issued late Monday that while California's intentions may have been admirable, federal law takes precedence in the regulation of banks.
"Consumer protection is not reflected in the case law as an area in which the states have traditionally been permitted to regulate national banks," Darmell wrote.
California officials had drafted the law, which was to take effect next July, as a means of stemming a worrisome tide of indebtedness by residents running up their credit cards and making only low monthly payments without realizing it could take them years to pay off their balances.
"We think it's good consumer policy to let people know how long it will take them to pay off their credit cards," State Attorney General Bill Lockyer told the Sacramento Bee. "It's especially disappointing that banks and credit unions don't want people to know how deep the hole is that they're digging."
The judge, however, said a 1954 Supreme Court ruling involving the state of New York held that the National Banking Act and other federal laws trumped state laws, even if the state statute was a worthy one.
"The court found the state law preempted, and concluded that 'however wise or needful New York's policy...it must give way to the contrary federal policy," Damrell said in a 44-page written ruling. "Similarly, the court may not consider the state's needfulness...no matter how compelling it finds the state's reasons for enactment of the statute."
The plaintiffs in the case against the state included banks and other credit card issuers who contended that the law was expensive to implement and maintain -- around $3.3 million for start-up costs and nearly $2 million per month afterward, including more than $600,000 per month to maintain a phone bank to assist customers.
The American Bankers Association said earlier this month that nationally, credit card delinquencies were down in the third quarter from 3.91 percent to 3.81 percent, although in terms of dollars, the amounts outstanding climbed from 4.08 percent to 4.45 percent.
"The lower delinquencies are a sign that consumers are doing a pretty good job managing their finances against the odds," said ABA economist James Chessen. "The continuing saga of a weak economy appears to have focused the attention of consumers on protecting their financial health."