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BEWARE OF THOSE CONVENIENCE CHECKS AND CREDIT CARDS THAT YOU RECEIVE FROM THE
BANKS.
By Olumide K. Obayemi*
1. Introduction.
More than 40 years after the death of the most courageous African-American civil rights leader Rev. Dr.
Martin Luther King, Jr., and almost 50 years after President Lyndon B. Johnson signed the Civil Rights
Act into law, eviscerating the innocuous and invidious discriminatory practice and oppressive Jim Crow
laws that stultified the ability of most of us from rising beyond the societal limits unjustly created by
men, we are now witnessing the emergence of our own Barrack Obama, coming within chances of
winning the election as the most powerful man on earth.
One way to ensure that more Obamas emerge from the African-American society is to create financial
and economic security for all. As Reggae legend Robert Nesta Marley has once said:
“Emancipate yourself from mental slavery,
None, but ourselves, can free our minds.”
-- Robert (Bob) Nesta Marley, Uprising, (1980).
This then brings us to the theme of this paper—escaping from those vicissitudes that prevent us from
achieving economic and financial security in the Western world. We all receive convenience checks
from the providers of credit cards that most of us Americans usually carry. For instance, my friend,
Tyrone, out of his good credit standing, may obtain a credit card with either Visa, Mastercard, or
American Express logo. Within two weeks, Tyrone would, invariably, receive convenience checks from
the credit card issuing corporation. This is because, generally, the banks that issue the credit cards
usually extend credit to their credit card holders by mailing them a preprinted check or draft, more
commonly known as a “convenience check.” The “convenience checks” are commonly attached to a
letter or invitation from the bank, and perforated so that they can be torn off and used. Those
convenience checks, if torn off and cashed, will, invariably, result in a charge against the user’s credit
card account, as well as associated finance charges or transaction fees.
The theme of this paper is to sound a warning to the African-American community and consumers that
if my good friend, Tyrone decides, (as I myself, am wont to do) to cash those convenience checks and
incurred those charges or fees, he must know that the law now requires that he must pay those
outrageous and exorbitant fees and charges because the federal laws and regulations governing the
National Banks that issue those credit cards and convenience checks are in favor of the banks, and
that those federal laws preempt the local consumer protection laws in California that are meant to
protect the unwary California consumers.
In a nutshell, there are no free lunches for you and me in today’s economic suffocating world. We are to
be guided by the applicable laws and so act to protect ourselves, financially and economically so that
we can liberate ourselves and the generations of African-Americans following us from the dungeon of
economic incapacity foisted on us by history, circumstances, and, lately, by ourselves.[1]
II. California’s Efforts Aimed at Protecting Unwary Consumers.
Over a long period of time, since the expansion of the cut-throat capitalist corporations that seek to
financially ambush, economically colonize, and lay hidden traps for the unwary consumers—especially,
the African-Americans and other minorities, the California legislature had acted decisively by making
laws for the protection of the consumers. Among these laws are (a). Cal. Civ. Code § 1748.9, which
requires adequate warnings and disclosures where the Banks seek to create a creditor-debtor
relationship; and (b) California’s Unfair Competition Law (“UCL”), see Cal. Bus. & Prof. Code § 17200
et seq., prohibiting “unlawful” business practice, “fraudulent” business practice, and/or engaging in
“deceptive or misleading advertising” when the Bank fails to make the requisite disclosures. For this
paper, we shall look, very briefly, at Cal. Civ. Code § 1748.9.
Historically, a victim of cut-throat fees and charges emanating from use of credit cards and
convenience checks, may proceed against the Bank, especially, where the Bank did not include or
attach language pursuant to Cal. Civ. Code § 1748.9(a)(1) that “use of the attached check...will
constitute a charge against [Plaintiff’s] credit account.” My fictitious friend, Tyrone, may also sue the
Bank on the grounds that the Bank also did not disclose, pursuant to § 1748.9(a)(3), whether the
finance charges would be triggered immediately upon the use of the check.
III. Protection Under Cal. Civ. Code § 1748.9
Cal. Civ. Code § 1748.9, which became operative on July 1, 2000, provides in full:
(a) A credit card issuer that extends credit to a cardholder through the use of a preprinted check or draft
shall disclose on the front of an attachment that is affixed by perforation or other means to the
preprinted check or draft, in clear and conspicuous language, all of the following information:
(1) That “use of the attached check or draft will constitute a charge against your credit account.”
(2) The annual percentage rate and the calculation of finance charges, as required by Section 226.16 of
Regulation Z of the Code of Federal Regulations, associated with the use of the attached check or draft.
(3) Whether the finance charges are triggered immediately upon the use of the check or draft.
The clear terms of Cal. Civ. Code § 1748.9(a)(1),(2),&(3) are that the issuers of credit cards and
convenience checks must make certain disclosures to the California Consumers. These mandatory
disclosures include: (a) the “use of the attached check or draft will constitute a charge against your
credit account”; (b) “the annual percentage rate and the calculation of finance charges…associated
with the use of the attached check or draft; and (c) “whether the finance charges are triggered
immediately upon the use of the check or draft.”
These above disclosures are mandatory: The Banks “…shall disclose on the front of an attachment
that is affixed by perforation or other means to the preprinted check or draft, in clear and conspicuous
language…”
Failure to make these disclosures is a ground for proceedings for relief and damages under the
California’s Unfair Competition Law
IV. Federal Pre-Emption of Cal. Civ. Code § 1748.9—a Loss to California Consumers.
In 2004, the death-knell sounded for whatever protection that a California consumer may have with the
enactment of the National Bank Act (“NBA”), 12 U.S.C. § 21 et seq., as well as regulations promulgated
thereunder by the federal Office of the Comptroller of the Currency (“OCC”), see 12 CFR § 7.4008.
These federal laws and regulations preempt the California’s Unfair Competition Law and Cal. Civ.
Code § 1748.9(a)(1),(2),&(3)
For, instance, the National Bank Act provides, in relevant part, that nationally chartered banks may
exercise “all such incidental powers as shall be necessary to carry on the business of banking [such
as] . . . by loaning money on personal security.” 12
U.S.C. § 24 (Seventh).
Also, the OCC regulations, effective February 12, 2004, (See 69 Fed. Reg. 1904 (2004)), further provide
that “[a] national bank may make, sell, purchase, participate in, or otherwise deal in loans and interests
in loans that are not secured by liens on, or interests in, real estate, subject to such terms, conditions,
and limitations prescribed by the Comptroller of the Currency and any other applicable Federal law.” 12
CFR § 7.4008(a).
Further, with regard to the applicability of state law, the OCC regulations provide in relevant part:
***
(d) Applicability of state law.
(1) Except where made applicable by Federal law, state laws that obstruct, impair, or condition a
national bank’s ability to fully exercise its Federally authorized non-real estate lending powers are not
applicable to national banks.
(2) A national bank may make non-real estate loans without regard to state law limitations concerning .
. .
***
(viii) Disclosure and advertising, including laws requiring specific statements, information, or other
content to be included in credit application forms, credit solicitations, billing statements, credit
contracts, or other credit-related documents . . .
See 12 CFR § 7.4008(d).
Without much ado, the credit cards and convenience checks issued by National Banks are protected
from the consumer laws under the above National Bank Act and OCC Regulations being that the latter
laws are federal laws. “Nearly two hundred years ago...[the Supreme] Court held federal law supreme
over state law with respect to national banking.” Watters v. Wachovia Bank, N.A., 127 S. Ct. 1559, 1566
(2007) (citing McCulloch v. Maryland, 17 U.S. 316 (1819)). “In 1864, Congress enacted the NBA,
establishing the system of national banking still in place today.” Id. (citations omitted). The Act vested in
nationally chartered banks enumerated powers and “all such incidental powers as shall be necessary
to carry on the business of banking.” Id. (citing 12 U.S.C. § 24 (Seventh)). Those incidental powers
include the power to “loan money on personal security,” which is at issue in the instant case. See 12 U.
S.C. § 24 (Seventh); see also Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949, 959 n.13 (9th Cir. 2005).
The Supreme Court has interpreted grants of “powers” to national banks as “grants of authority not
normally limited by, but rather ordinarily pre-empting, contrary state law.”3 Watters, 127 S. Ct. at 1567
(citing Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 32 (1996)); accord Boutris, 419 F.3d
at 956 (citing Bank of Am. v. City of San Francisco, 309 F.3d 551, 558 (9th Cir. 2002)). Accordingly, “the
usual presumption against federal preemption of state law is inapplicable to federal banking
regulation.” Boutris, 419 F.3d at 956 (citing Bank of Am., 309 F.3d at 558-59); see also Barnett Bank,
517 U.S. at 32.
The law is that “Federally chartered banks are subject to state laws of general application in their daily
business to the extent such laws do not conflict with the letter or the general purposes of the NBA.”
Watters, 127 S. Ct. at 1567 (citing Atherton v. FDIC, 519 U.S. 222, 223 (1997); Davis v. Elmira Sav. Bank,
161 U.S. 275, 290 (1896)); see also Bank of Am., 309 F.3d at 558-59.
“However, ‘the States can exercise no control over [national banks], nor in any wise affect their
operation, except in so far as Congress may see proper to permit. Any thing beyond this is an abuse,
because it is the usurpation of power which a single State cannot give.’ ” Watters, 127 S. Ct. at 1567
(quoting Farmers’ and Mechanics’ Nat’l Bank v. Dearing, 91 U.S. 29, 34 (1875)).
“States are permitted to regulate the activities of national banks where doing so does not prevent or
significantly interfere with the national bank’s or the national bank regulator’s exercise of its powers.
But when state prescriptions significantly impair the exercise of authority, enumerated or incidental
under the NBA, the State’s regulations must give way.” Id. (citing Franklin Nat’l Bank of Franklin Square
v. New York, 347 U.S. 373, 377-79 (1954); Barnett Bank, 517 U.S. at 32-34); see also Boutris, 419 F.3d
at 963 (citing Bank of Am., 309 F.3d at 559).
As the Supreme Court has rightly stated, “normally Congress would not want States to forbid, or to
impair significantly, the exercise of a power that Congress explicitly granted.” Bank of Am., 309 F.3d at
561 (citing Barnett Bank, 517 U.S. at 33).
Congress, when it enacted the NBA, explicitly granted such a power here. The NBA specifically
enumerates, without limitation, as one “incidental power” of a national bank the power to “loan money
on personal security.” See 12 U.S.C. § 24 (Seventh); see also Boutris, 419 F.3d at 959 n.13. That power
to “loan money on personal security” is the power pursuant to which Chase here extends credit to its
cardholders via convenience checks.
V. Conclusion
Even, if Obama does not become the next President, we, African-Americans can stand tall, as he has
made us proud. Nevertheless, we have more work to do. We must learn to manage our financial affairs
and start to escape odious debts and so create financial freedom for the next generations of African-
Americans.
Therefore, where, as here, Congress has explicitly granted a power to a national bank without any
indication that Congress intended for that power to be subject to local restriction, Congress is
presumed to have intended to preempt state laws such as Cal Civ. Code § 1748.9. See Barnett Bank,
517 U.S. at 33-35; see also Franklin, 347 U.S. at 378; cf. Watters, 127 S. Ct. at 1570 (“[I]n analyzing
whether state law hampers the federally permitted activities of a national bank, we have focused on the
exercise of a national bank’s powers.”) (emphasis in original).
In concluding, based on the holdings of Barnett Bank and Franklin, the NBA and the OCC Regulations
preempt the disclosure requirements of Cal. Civ. Code 1748.9, insofar as those requirements apply to
national banks.
We, the minorities in this great American nation, must cut our clothes to our sizes, and we must be
hesitant in spending “fee” money from credit cards and convenience checks whose terms and
conditions are hidden from us. One day, we shall really be economically and financially free.
February 24, 2008
*. Olumide K. Obayemi is an attorney admitted in California and Federal Republic of Nigeria. He can be
reached at (510) 798-8732 or obayemilaw@hotmail.com.
Comment
BANKS.
By Olumide K. Obayemi*
1. Introduction.
More than 40 years after the death of the most courageous African-American civil rights leader Rev. Dr.
Martin Luther King, Jr., and almost 50 years after President Lyndon B. Johnson signed the Civil Rights
Act into law, eviscerating the innocuous and invidious discriminatory practice and oppressive Jim Crow
laws that stultified the ability of most of us from rising beyond the societal limits unjustly created by
men, we are now witnessing the emergence of our own Barrack Obama, coming within chances of
winning the election as the most powerful man on earth.
One way to ensure that more Obamas emerge from the African-American society is to create financial
and economic security for all. As Reggae legend Robert Nesta Marley has once said:
“Emancipate yourself from mental slavery,
None, but ourselves, can free our minds.”
-- Robert (Bob) Nesta Marley, Uprising, (1980).
This then brings us to the theme of this paper—escaping from those vicissitudes that prevent us from
achieving economic and financial security in the Western world. We all receive convenience checks
from the providers of credit cards that most of us Americans usually carry. For instance, my friend,
Tyrone, out of his good credit standing, may obtain a credit card with either Visa, Mastercard, or
American Express logo. Within two weeks, Tyrone would, invariably, receive convenience checks from
the credit card issuing corporation. This is because, generally, the banks that issue the credit cards
usually extend credit to their credit card holders by mailing them a preprinted check or draft, more
commonly known as a “convenience check.” The “convenience checks” are commonly attached to a
letter or invitation from the bank, and perforated so that they can be torn off and used. Those
convenience checks, if torn off and cashed, will, invariably, result in a charge against the user’s credit
card account, as well as associated finance charges or transaction fees.
The theme of this paper is to sound a warning to the African-American community and consumers that
if my good friend, Tyrone decides, (as I myself, am wont to do) to cash those convenience checks and
incurred those charges or fees, he must know that the law now requires that he must pay those
outrageous and exorbitant fees and charges because the federal laws and regulations governing the
National Banks that issue those credit cards and convenience checks are in favor of the banks, and
that those federal laws preempt the local consumer protection laws in California that are meant to
protect the unwary California consumers.
In a nutshell, there are no free lunches for you and me in today’s economic suffocating world. We are to
be guided by the applicable laws and so act to protect ourselves, financially and economically so that
we can liberate ourselves and the generations of African-Americans following us from the dungeon of
economic incapacity foisted on us by history, circumstances, and, lately, by ourselves.[1]
II. California’s Efforts Aimed at Protecting Unwary Consumers.
Over a long period of time, since the expansion of the cut-throat capitalist corporations that seek to
financially ambush, economically colonize, and lay hidden traps for the unwary consumers—especially,
the African-Americans and other minorities, the California legislature had acted decisively by making
laws for the protection of the consumers. Among these laws are (a). Cal. Civ. Code § 1748.9, which
requires adequate warnings and disclosures where the Banks seek to create a creditor-debtor
relationship; and (b) California’s Unfair Competition Law (“UCL”), see Cal. Bus. & Prof. Code § 17200
et seq., prohibiting “unlawful” business practice, “fraudulent” business practice, and/or engaging in
“deceptive or misleading advertising” when the Bank fails to make the requisite disclosures. For this
paper, we shall look, very briefly, at Cal. Civ. Code § 1748.9.
Historically, a victim of cut-throat fees and charges emanating from use of credit cards and
convenience checks, may proceed against the Bank, especially, where the Bank did not include or
attach language pursuant to Cal. Civ. Code § 1748.9(a)(1) that “use of the attached check...will
constitute a charge against [Plaintiff’s] credit account.” My fictitious friend, Tyrone, may also sue the
Bank on the grounds that the Bank also did not disclose, pursuant to § 1748.9(a)(3), whether the
finance charges would be triggered immediately upon the use of the check.
III. Protection Under Cal. Civ. Code § 1748.9
Cal. Civ. Code § 1748.9, which became operative on July 1, 2000, provides in full:
(a) A credit card issuer that extends credit to a cardholder through the use of a preprinted check or draft
shall disclose on the front of an attachment that is affixed by perforation or other means to the
preprinted check or draft, in clear and conspicuous language, all of the following information:
(1) That “use of the attached check or draft will constitute a charge against your credit account.”
(2) The annual percentage rate and the calculation of finance charges, as required by Section 226.16 of
Regulation Z of the Code of Federal Regulations, associated with the use of the attached check or draft.
(3) Whether the finance charges are triggered immediately upon the use of the check or draft.
The clear terms of Cal. Civ. Code § 1748.9(a)(1),(2),&(3) are that the issuers of credit cards and
convenience checks must make certain disclosures to the California Consumers. These mandatory
disclosures include: (a) the “use of the attached check or draft will constitute a charge against your
credit account”; (b) “the annual percentage rate and the calculation of finance charges…associated
with the use of the attached check or draft; and (c) “whether the finance charges are triggered
immediately upon the use of the check or draft.”
These above disclosures are mandatory: The Banks “…shall disclose on the front of an attachment
that is affixed by perforation or other means to the preprinted check or draft, in clear and conspicuous
language…”
Failure to make these disclosures is a ground for proceedings for relief and damages under the
California’s Unfair Competition Law
IV. Federal Pre-Emption of Cal. Civ. Code § 1748.9—a Loss to California Consumers.
In 2004, the death-knell sounded for whatever protection that a California consumer may have with the
enactment of the National Bank Act (“NBA”), 12 U.S.C. § 21 et seq., as well as regulations promulgated
thereunder by the federal Office of the Comptroller of the Currency (“OCC”), see 12 CFR § 7.4008.
These federal laws and regulations preempt the California’s Unfair Competition Law and Cal. Civ.
Code § 1748.9(a)(1),(2),&(3)
For, instance, the National Bank Act provides, in relevant part, that nationally chartered banks may
exercise “all such incidental powers as shall be necessary to carry on the business of banking [such
as] . . . by loaning money on personal security.” 12
U.S.C. § 24 (Seventh).
Also, the OCC regulations, effective February 12, 2004, (See 69 Fed. Reg. 1904 (2004)), further provide
that “[a] national bank may make, sell, purchase, participate in, or otherwise deal in loans and interests
in loans that are not secured by liens on, or interests in, real estate, subject to such terms, conditions,
and limitations prescribed by the Comptroller of the Currency and any other applicable Federal law.” 12
CFR § 7.4008(a).
Further, with regard to the applicability of state law, the OCC regulations provide in relevant part:
***
(d) Applicability of state law.
(1) Except where made applicable by Federal law, state laws that obstruct, impair, or condition a
national bank’s ability to fully exercise its Federally authorized non-real estate lending powers are not
applicable to national banks.
(2) A national bank may make non-real estate loans without regard to state law limitations concerning .
. .
***
(viii) Disclosure and advertising, including laws requiring specific statements, information, or other
content to be included in credit application forms, credit solicitations, billing statements, credit
contracts, or other credit-related documents . . .
See 12 CFR § 7.4008(d).
Without much ado, the credit cards and convenience checks issued by National Banks are protected
from the consumer laws under the above National Bank Act and OCC Regulations being that the latter
laws are federal laws. “Nearly two hundred years ago...[the Supreme] Court held federal law supreme
over state law with respect to national banking.” Watters v. Wachovia Bank, N.A., 127 S. Ct. 1559, 1566
(2007) (citing McCulloch v. Maryland, 17 U.S. 316 (1819)). “In 1864, Congress enacted the NBA,
establishing the system of national banking still in place today.” Id. (citations omitted). The Act vested in
nationally chartered banks enumerated powers and “all such incidental powers as shall be necessary
to carry on the business of banking.” Id. (citing 12 U.S.C. § 24 (Seventh)). Those incidental powers
include the power to “loan money on personal security,” which is at issue in the instant case. See 12 U.
S.C. § 24 (Seventh); see also Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949, 959 n.13 (9th Cir. 2005).
The Supreme Court has interpreted grants of “powers” to national banks as “grants of authority not
normally limited by, but rather ordinarily pre-empting, contrary state law.”3 Watters, 127 S. Ct. at 1567
(citing Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 32 (1996)); accord Boutris, 419 F.3d
at 956 (citing Bank of Am. v. City of San Francisco, 309 F.3d 551, 558 (9th Cir. 2002)). Accordingly, “the
usual presumption against federal preemption of state law is inapplicable to federal banking
regulation.” Boutris, 419 F.3d at 956 (citing Bank of Am., 309 F.3d at 558-59); see also Barnett Bank,
517 U.S. at 32.
The law is that “Federally chartered banks are subject to state laws of general application in their daily
business to the extent such laws do not conflict with the letter or the general purposes of the NBA.”
Watters, 127 S. Ct. at 1567 (citing Atherton v. FDIC, 519 U.S. 222, 223 (1997); Davis v. Elmira Sav. Bank,
161 U.S. 275, 290 (1896)); see also Bank of Am., 309 F.3d at 558-59.
“However, ‘the States can exercise no control over [national banks], nor in any wise affect their
operation, except in so far as Congress may see proper to permit. Any thing beyond this is an abuse,
because it is the usurpation of power which a single State cannot give.’ ” Watters, 127 S. Ct. at 1567
(quoting Farmers’ and Mechanics’ Nat’l Bank v. Dearing, 91 U.S. 29, 34 (1875)).
“States are permitted to regulate the activities of national banks where doing so does not prevent or
significantly interfere with the national bank’s or the national bank regulator’s exercise of its powers.
But when state prescriptions significantly impair the exercise of authority, enumerated or incidental
under the NBA, the State’s regulations must give way.” Id. (citing Franklin Nat’l Bank of Franklin Square
v. New York, 347 U.S. 373, 377-79 (1954); Barnett Bank, 517 U.S. at 32-34); see also Boutris, 419 F.3d
at 963 (citing Bank of Am., 309 F.3d at 559).
As the Supreme Court has rightly stated, “normally Congress would not want States to forbid, or to
impair significantly, the exercise of a power that Congress explicitly granted.” Bank of Am., 309 F.3d at
561 (citing Barnett Bank, 517 U.S. at 33).
Congress, when it enacted the NBA, explicitly granted such a power here. The NBA specifically
enumerates, without limitation, as one “incidental power” of a national bank the power to “loan money
on personal security.” See 12 U.S.C. § 24 (Seventh); see also Boutris, 419 F.3d at 959 n.13. That power
to “loan money on personal security” is the power pursuant to which Chase here extends credit to its
cardholders via convenience checks.
V. Conclusion
Even, if Obama does not become the next President, we, African-Americans can stand tall, as he has
made us proud. Nevertheless, we have more work to do. We must learn to manage our financial affairs
and start to escape odious debts and so create financial freedom for the next generations of African-
Americans.
Therefore, where, as here, Congress has explicitly granted a power to a national bank without any
indication that Congress intended for that power to be subject to local restriction, Congress is
presumed to have intended to preempt state laws such as Cal Civ. Code § 1748.9. See Barnett Bank,
517 U.S. at 33-35; see also Franklin, 347 U.S. at 378; cf. Watters, 127 S. Ct. at 1570 (“[I]n analyzing
whether state law hampers the federally permitted activities of a national bank, we have focused on the
exercise of a national bank’s powers.”) (emphasis in original).
In concluding, based on the holdings of Barnett Bank and Franklin, the NBA and the OCC Regulations
preempt the disclosure requirements of Cal. Civ. Code 1748.9, insofar as those requirements apply to
national banks.
We, the minorities in this great American nation, must cut our clothes to our sizes, and we must be
hesitant in spending “fee” money from credit cards and convenience checks whose terms and
conditions are hidden from us. One day, we shall really be economically and financially free.
February 24, 2008
*. Olumide K. Obayemi is an attorney admitted in California and Federal Republic of Nigeria. He can be
reached at (510) 798-8732 or obayemilaw@hotmail.com.
Comment