State Law Requiring Warning on Credit Cards Is Overturned

Citigroup Inc. and other credit card issuers don’t have to follow a California law that requires them to warn customers about the consequences of making only minimum monthly payments, a federal judge said.

U.S. District Judge Frank Damrell said in a ruling made public Tuesday that California couldn’t impose its laws on banks, which are generally governed by federal law. The consumer protection law was to take effect last July.

The American Bankers Assn. and five major credit card issuers sued the state last year, claiming that it would cost the industry millions of dollars to implement the policy.

The state argued that the law would protect California consumers, who are accumulating historic amounts of debt.

“This was a good California consumer law,” said Hallye Jordan, a spokeswoman for Atty. Gen. Bill Lockyer. “It makes sense to educate and inform consumers about the debt they can rack up if they simply make minimum payments.”

Lockyer is considering an appeal, Jordan said.

The law is “constitutionally inapplicable in its entirety to federally chartered credit card issuers,” Damrell wrote.

A call to the American Bankers Assn. wasn’t immediately returned.

The credit card companies that joined the suit are Citigroup’s Citibank, J.P. Morgan Chase & Co.’s Chase Manhattan Bank, MBNA Corp.’s MBNA America Bank, Bank One Corp.’s First USA Bank and Household International Inc.’s Household Bank.