In re: Late Fee & Over-Limit Fee Litigation

Substantive due process jurisprudence placing limitations on punitive damages does not apply to contractual penalties such as credit card late payment or overlimit fees.

The Appellants in this matter are a class of credit card consumers with one or more of the Appellees. Appellees are some of the largest issuers of consumer credit cards in the United States. The Appellants were charged late fees or overlimit fees per their credit card contracts and argued that the fees were unconstitutionally excessive because they vastly exceeded the harm that the card issuers are suffering due to their credit limit exceedance or late payments. The Appellants argued that the National Bank Act of 1864 and the Depository Institutions Deregulation and Monetary Control Act (“DIDMCA”) cannot authorize fees that constitute unconstitutionally excessive punitive damages. The Appellants made a substantive due process claim arguing that due process constraints apply to credit card fees. The Ninth Circuit noted that federal law permits card issuers to charge late fees and overlimit fees to customers as long as the fees are legal per the state law where the card was issued. Additionally, the panel addressed the scope of punitive damages as resulting from a tort. These damages are typically not recoverable for breach of contract unless that breach results in conduct that is also a tort. The panel summarized that adhesive contracts, such as the credit card contracts at issue here, are distinct from jury-determined punitive damages, and the due process analysis developed to evaluate punitive damages awarded by juries was not applicable here. Further, the panel noted that the unfair competition claim made by the Appellants was also not applicable because state law was not violated. AFFIRMED.