Case Name: JAMES H. HUNTER, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT, v. GREENWOOD TRUST COMPANY, DEFENDANT-RESPONDENT
Court: Supreme Court of New Jersey
Jurisdiction: New Jersey
Decision Date: 1995-11-28
Citations: 143 N.J. 97
Docket Number: 
Parties: JAMES H. HUNTER, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT, v. GREENWOOD TRUST COMPANY, DEFENDANT-RESPONDENT.
Judges: 
Reporter: New Jersey Reports
Volume: 143
Pages: 97–115

Head Matter:
668 A.2d 1067
JAMES H. HUNTER, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT, v. GREENWOOD TRUST COMPANY, DEFENDANT-RESPONDENT.
Argued February 15, 1995
Decided November 28, 1995.
Alan S. Kaplinsky, Burt M. Rublin, Philadelphia, Pa., for Greenwood Trust Co.
Michael D. Donovan, a member of the Pennsylvania bar, argued the cause for appellant (Spector Gadon & Rosen, attorneys; Mr. Donovan and Ann Miller, a member of the Pennsylvania bar, of counsel; Mr. Donovan, Ms. Miller, Paul R. Rosen and Robert L. Grundlock, Jr., on the briefs).
Arthur R. Miller, a member of the Massachusetts bar, argued the cause for respondent (Archer & Greiner, attorneys; Mr. Miller and Sean T. O’Meara, on the briefs).
Marilyn A Bair, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey {James J. Cianeia, Acting Attorney General, attorney; Andrea M. Silkow-itz, Assistant Attorney General, of counsel).
Richard P. Jacobson submitted a brief on behalf of amici curiae The States of Arizona, Delaware, Louisiana, Nevada, Ohio, South Dakota, and Utah {Dunn, Pashman, Sponzilli, Swick & Finnerty, attorneys).
Charles N. Riley submitted a brief on behalf of amicus curiae Consumer Action {Tomar, Simonoff, Adourian & O’Brien, attorneys).
Beverly R. Porway, Counsel, submitted a brief on behalf of amicus curiae Federal Deposit Insurance Corporation.
Charles N. Riley submitted a brief on behalf of amici curiae the States of Hawaii, Iowa, Maryland, Massachusetts, Pennsylvania, South Carolina, Vermont, West Virginia, and Wisconsin {Tomar, Simonoff, Adourian & O’Brien, attorneys).
Dennis R. Casale submitted a brief on behalf of amici curiae The New Jersey Bankers Association, American Bankers Association, American Financial Services Association and Consumer Bankers Association {Jamieson, Moore, Peskin & Spicer, attorneys).
Michael J. Dunne submitted a brief on behalf of amici curiae Visa U.S.A., Inc., and Mastercard International Incorporated {Pit-ney, Hardin, Kipp & Szuch, attorneys).

Opinion:
The opinion of the Court was delivered by
HANDLER, J.
The facts and issues in this case are substantially similar to those in the companion case, Sherman v. Citibank (South Dakota), N.A., 143 N.J. 35, 668 A.2d 1036 rev'g 272 N.J.Super. 435, 640 A.2d 325 (1994), also decided today. Here, New Jersey credit-card holders challenge the legality of late-payment fees assessed by Greenwood Trust, a federally-insured state bank chartered in Delaware. The bank, on the other hand, claims that it is permitted under the Depository Institutions Deregulation and Monetary Control Act to charge out-of-state customers the same interest rate and other lender-imposed charges it is authorized to charge its own customers.
The specific issues are framed by the contentions of the parties. Plaintiff is the named party in this class-action suit. As in Sherman, plaintiff argues that New Jersey's Retail Installment Sales Act, N.J.SA 17:16C-50, -54 (RISA) (since amended, L. 1995, c. 43) forbids federally-insured state banks that issue credit cards to New Jersey customers from charging late-payment fees, that defendant's advertising and eardmember agreements violate New Jersey's Consumer Fraud Act, N.J.SA 56:8-2, -19 (CFA), and that the imposition of late-payment fees constitutes a common-law breach of contract and conversion. Like the claims in Sherman, plaintiffs claims focus on whether the notion of interest includes late-payment charges.
Greenwood Trust, however, argues it is free to charge late-payment fees in New Jersey. It relies on section 521 of the Depository Institutions Deregulation and Monetary Control Act, 12 U.S.CA § 1831d (DIDA), which expressly mirrors section 85 of the National Bank Act, 12 U.S.C.A § 85(NBA), and provides that federally-insured state banks may charge borrowers "interest at a rate allowed by the laws of the State . where the bank is located." 12 U.S.CA § 1831d(a). Section 521 expressly preempts conflicting state "constitution[s] or statute[s]." Ibid. Because it is a federally-insured state bank chartered in Delaware, which includes late fees in its statutory definition of interest, Greenwood Trust argues that RISA and plaintiffs other claims conflict with, and are preempted by, section 521. 272 N.J.Super. at 438-39, 640 A.2d 325.
The Law Division dismissed the complaint. The Appellate Division affirmed, 272 N.J.Super. 435, 640 A.2d 325, and we granted plaintiffs petition for certification. 138 N.J. 270, 649 A.2d 1289 (1994).
For substantially the same reasons expressed in Sherman, we conclude that this State's usury law prohibiting banks from charging late fees does not conflict with the federal statute giving national banks and federally-insured state banks preferential treatment with respect to lending authority. We hold that DIDA does not preempt the New Jersey RISA's prohibition on late-payment fees, and, therefore, reverse the judgment of the Appellate Division.
I
Although it is clear that Congress intended section 521 to preempt conflicting state usury provisions, federal preemption of state law requires an actual conflict, not merely a potential, speculative or hypothetical one. Rice v. Norman Williams Co., 458 U.S. 654, 659, 102 S.Ct. 3294, 3298-99, 73 L.Ed.2d 1042, 1049 (1982); Brown v. Hotel Employees International Union, 468 U.S. 491, 510, 104 S.Ct. 3179, 3185, 82 L.Ed.2d 373, 389 (1984). An actual conflict arises when it is impossible to comply with both state and federal law, or when state law is an obstacle to the accomplishment of the full purposes and objectives of Congress. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299-300, 108 S.Ct. 1145, 1150-51, 99 L.Ed.2d 316, 325 (1988); Feldman v. Lederle Lab., 125 N.J. 117, 135, 592 A.2d 1176 (1991). However, courts faced with potentially conflicting state and federal statutes must attempt to harmonize them whenever possible. Exxon Corp. v. Hunt, 97 N.J. 526, 533, 481 A.2d 271 (1984) (citing Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963); Huron Cement Co. v. City of Detroit, 362 U.S. 440, 80 S.Ct. 813, 4 L.Ed.2d 852 (1960)). "Preemption of state law by federal statute is not favored 'in the absence of persuasive reasons — either that the nature of the regulated subject matter permits no other conclusion, or that Congress has unmistakenly so ordained.' " Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258, 264-65 (1981) (quoting Florida Lime & Avocado Growers, Inc., supra, 373 U.S. at 142, 83 S.Ct. at 1217, 10 L.Ed.2d at 257).
Section 521 of DIDA provides that any federally-insured state bank may:
notwithstanding any State constitution or statute to the contrary which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any loan or discount made, or upon any note, bill or exchange, or other evidence of debt, interest at a rate of not more than 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such State bank . is located or at the rate allowed by the laws of the State . where the bank is located, whichever may be the greater____
[ 12 U.S.C.A § 1831d(a)J
The language and purpose of section 521 essentially imitate that of section 85 of the NBA. See, e.g., Copeland v. MBNA America Bank, N.A, — Colo. -,-, 907 P.2d 87 (1995). Courts and federal agencies have interpreted Section 521 as conferring on federally-insured state banks the same insulation from State usury laws that national banks have enjoyed for over 100 years under the NBA. Greenwood Trust Co. v. Massachusetts, 971 F.2d 818, 826-27 (1st Cir.1992) (concluding that section 521 permits federally-insured state banks to "export" interest rates), rev'g 776 F.Supp. 21 (D.Mass.1991); VanderWeyst v. First State Bank, 425 N.W.2d 803, 806 (Minn.) (concluding that section 521 gives federally-insured state banks "most-favored-lender" status), cert. denied, 488 U.S. 943, 109 S.Ct. 369, 102 L.Ed.2d 359 (1988); Smiley v. Citibank (South Dakota), N.A., 11 Cal.4th 138, 44 Cal.Rptr.2d 441, 465-66, 900 P.2d 690 (1995) (Arabian, J., dissenting); id. 44 Cal.Rptr.2d at 467-68, 900 P.2d 690 (George, J., dissenting). Thus, "interest," as that term is used in the NBA and DIDA, should be construed uniformly. E.g., Greenwood Trust, supra, 971 F.2d at 827 ("historical record clearly requires a court to read the parallel provisions of DIDA and the Bank Act in pari materia "); see also Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384, 112 S.Ct. 2031, 2037, 119 L.Ed.2d 157, 167 (1992) (finding that when legislature borrows exact phrase from existing statute, courts should adopt prior judicial interpretations of that phrase). As demonstrated in Sherman, the term "interest" in the NBA does not include late fees, 143 N.J. at 45-60, 668 A.2d 1036; Smiley, supra, 44 Cal.Rptr.2d at 469, 900 P.2d 690 (George, J., dissenting). We conclude that "interest" in DIDA similarly does not include late fees.
Like section 85, the. language in section 521 expressly refers to interest rates. It says nothing about other specific charges associated with lending money. Thus, it would be improvident to impute to Congress the intent to include in the statute a meaning it did not express. Moreover, as we discussed at length in Sherman, the legislative history surrounding DIDA's enactment indicates that Congress intended to preempt only state usury laws regarding traditional interest, namely, periodic percentage rates, not other specific charges. See Sherman, 143 N.J. at 49-52, 668 A.2d 1036; see also Smiley, supra, 44 Cal.Rptr.2d 441, 465, 900 P.2d 690 (Arabian, J., dissenting).
The record of Congressional debate and deliberation concerning the enactment of DIDA is generally supportive of the notion that preemption of credit-card regulation under DIDA is confined to numerical interest rates. Ibid. Even if the sponsors and supporters of DIDA preemption provisions were shown to be committed to achieving total competitive equality of all lending terms offered by state banks and national banks, the simultaneous and persistent concerns of the bill's sponsors to preserve state consumer protection must likewise be acknowledged. During Senate consideration of the conference report on March 27, 1980, Senator Proxmire emphasized the limited preemptive scope of Title V. This limitation, in DIDA's Title V, to annual percentage rates is clear from the Senate floor discussions of mortgage loans, from the Senate Banking Committee Report, and from the hearings on DIDA in the House of Representatives.
II
In this case, as in Sherman, the defendant relies on an agency interpretation of the statute to support its expanded notion of interest. However, to rely upon agency determinations in this case would be to undermine our responsibility to interpret the law by the views of an entity that has heretofore failed to provide a clear and consistent understanding of what Congress intended to include in its definition of interest. Far less than the usual amount of deference to an agency interpretation is appropriate when that agency has failed to adopt a consistent interpretation in administering the statute in question. See Sherman, supra, 143 N.J. at 56-58, 668 A.2d 1036 (citing INS v. Cardoza-Fonseca, 480 U.S. 421, 446 n. 30, 107 S.Ct. 1207, 1221 n. 30, 94 L.Ed.2d 434, 457 n. 30 (1987); Watt v. Alaska, 451 U.S. 259, 273, 101 S.Ct. 1673, 1681, 68 L.Ed.2d 80 (1981); General Elec. Co. v. Gilbert, 429 U.S. 125, 143, 97 S.Ct. 401, 411-12, 50 L.Ed.2d 343 (1976)); see also Director, Office of Workers' Compensation Programs v. Mangifest, 826 F. 2d 1318, 1319-20 (3d Cir.1987) (finding "ambiguities and inconsistencies in the Director's interpretation . of regulations . sufficiently great to preclude deference"); Disabled in Action v. Sykes, 833 F. 2d 1113, 1117-19 (3d Cir.1987), cert. denied, 485 U.S. 989, 108 S.Ct. 1293, 99 L.Ed.2d 503 (1988); Revak v. National Mines Corp., 808 F.2d 996, 1002 (3d Cir.1986) (rejecting deference arguments due to inconsistent agency interpretation of statute). Neither the Office of the Comptroller of the Currency (OCC), which regulates national banks, nor the Federal Deposit Insurance Company (FDIC), the agency charged with the regulation of federally-insured banks, has issued consistent rulings concerning the interpretation of interest for purposes of the NBA and DIDA. See Sherman, supra, 148 N.J. at 58-60, 668 A.2d 1036. But cf. Copeland, supra, — Colo. at-, 907 P.2d 87 (asserting that "[t]he OCC consistently has taken the position that late payment fees are interest" under both section 85 of the NBA and section 521 of the DIDA) (emphasis added). Inconsistent agency rulings should not be guides for a judiciary, the government branch principally responsible for the construction of statutes. See, e.g., SEC v. Sloan, 436 U.S. 103, 118, 98 S.Ct. 1702, 1711, 56 L.Ed.2d 148 (1978); Federal Maritime Comm. v. Seatrain Lines, Inc., 411 U.S. 726, 745-46, 93 S.Ct. 1773, 1784-85, 36 L.Ed.2d 620, 633-34 (1973).
Ill
In addition, New Jersey's State Bank Parity Act, N.J.S.A 17:13B-1 to -2, does not authorize banks located in this State to charge late-payment fees in the guise of interest. Sherman, 143 N.J. at 61-64, 668 A.2d 1036. Defendant contends, as did the defendant in Sherman, that because New Jersey credit unions are authorized to charge late fees to credit-card customers, N.J.SA 17:13-104b, New Jersey banks are so authorized pursuant to the State Bank Parity Act. That is simply not the case.
The State Bank Parity Act authorizes New Jersey banks to charge the same "rate of interest" charged by credit unions. N.J.SA 17:13B-2 provides, in pertinent part, that,
any bank, savings bank, savings and loan association or credit union may charge a rate of interest on any class or type of loan at the rate of interest permitted to any other lender by the laws of this State on that class or type of loan.
[N.J.S.A 17:13B-2 (emphasis added).]
Although the Act provides for parity between the rates of interest charged by both banks and credit unions, the act does not explicitly authorize banks to charge other types of fees. Furthermore, there is no indication that the Legislature implicitly intend ed to authorize the imposition of such other fees in the State Bank Parity Act. See Sherman, supra, 143 N.J. at 61-64, 668 A.2d 1036. There are sound reasons grounded in public policy why the Legislature would choose not to equate interest charges with other imposed fees like late charges. For example, because small, individualized lenders, such as credit unions, serve their own members and do not cater to a large market, they cannot spread costs like banks. Thus, they must be permitted to take certain actions to insure their solvency, such as charging late-payment fees. Ibid.
We hold that Greenwood Trust has failed to demonstrate a Congressional intention to preempt state usury laws that prohibit discrete, specialized charges that do not directly affect the interest rate. Thus, there is no conflict between New Jersey's RISA statute and DIDA Prohibiting either national banks or federally-insured state banks from charging late fees does not constitute discrimination because, at the time defendant procured those charges, New Jersey banks were likewise prohibited from assessing them. Unless Congress itself expressly provides otherwise through legislation, we find that New Jersey's RISA statute prohibits Greenwood Trust from charging New Jersey customers late fees.
We note, however, as we did in Sherman, supra, 143 N.J. at 69, 668 A.2d 1036, that the late-charges at issue in this case were assessed prior to the enactment of L. 1995, c. 43, which amended the RISA to specifically allow for late-payment charges on retail charge accounts. The new statute, which took effect on May 29, 1995, applies prospectively only, and therefore is inapplicable to the late-payment charges at issue here. Nevertheless, we recognize that the newly amended RISA statute authorizes holders of retail charge accounts to charge late fees to customers. Thus, it would appear that N.J.S.A 17:16C-42, as amended, permits national banks and federally-insured state banks issuing credit cards to charge late-payment fees. Sherman, supra, 143 N.J. at 69-71, 668 A.2d 1036. The charges at issue in this case, however, are not permissible because they were assessed prior to May 29,1995, the date the amendment became effective.
IV
The judgment of the Appellate Division is reversed.
126 Cong.Rec. S. 6900 (March 27, 1980):
I wish to reemphasize the point made initially in the Senate Banking Committee report that in exempting mortgage loans from State usury limitations, we intend to exempt only those limitations that are included in the annual percentage rate. We do not intend to exempt limitations on prepayment charges, attorneys' fees, late charges or similar limitations designed to protect borrowers.
An official of the Federal National Mortgage Association, in response to an inquiry by Rep. St. Germaine, Chair of a House subcommittee considering DIDA, referred to the Senate Banking Committee Report cited above and stated:
This expression of legislative intent not to displace state laws designed for consumer protection with regard to charges other than charges treated as interest would leave in place those protective enactments in the various states that relate to prepayment penalties, late charges, regulations on disclosure of interest charges and restrictions on other costs in connection with loan transactions other than interest.
[Regulation Q. and Related Measures: Hearings Before the Subcommittee on Financial Institutions of the Committee on Banking, Finance and Urban Affairs, 96th Cong., 2d Sess. 125-26 (1980) (emphasis added).]