Court Opinion

ID: 9540886
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:20:29.643846+00
Date Added: 2024-06-11T15:01:27.250863
License: Public Domain

ARABIAN, J.
I dissent. The majority offers up a thoroughgoing revision of the history of American banking to justify a result that could not conceivably have been in the minds of the members of the Civil War Congress. It is, moreover, one that ignores not only an unambiguous statutory text and a consistent legislative history but what is perhaps the most prominent feature of American banking since the National Bank Act was passed in 1864—the “dual banking system,” under which Congress has historically deferred to the interests of the states in the regulation of national banks as to all matters except those essential to their role as instrumentalities of the federal government.
The setting of non-interest-rate credit card terms—like the late payment penalties charged California credit card users by out-of-state national banks at issue in this case—is a matter appropriate for regulation by the California Legislature. It is not one to be determined by the legislatures of a handful of small or sparsely populated states that have deregulated consumer credit in an attempt to attract the interstate credit card operations of large national banks.1
It may be that a nationwide banking system, especially in the consumer financial services marketplace, is the inexorable future of American banking. We have not as a nation reached that point, however, and the decision to do *166so and the means by which a truly interstate system of banking is to be effected are matters for Congress to decide, not a few large national banks aided by the compliant Legislatures of South Dakota and Delaware.2
I
The majority begins with the proposition that the purpose of the National Bank Act of 1864 (12 U.S.C.) was to grant to the newly established national banks “most favored lender status” by permitting them to charge the highest rate of interest allowed to lenders (including non-bank lenders) by the state in which the national bank is located. That, I agree, is the holding of the high court in Tiffany v. National Bank of Missouri (1874) 85 U.S. (18 Wall.) 409 [21 L.Ed. 862] (Tiffany). From the platform of this almost commonplace perception, rooted in the language of the Tiffany opinion itself, the majority then vaults to the far more disputable conclusion that Congress must have had in mind, not only “interest” in its “popular sense”—a sum charged for the lending of money, calculated at a periodic percentage over time, that is, rates of interest—but noninterest-rate credit terms such as, in this case, “late payment fees, if such fees are allowed by a national bank’s home state.” (Maj. opn., ante, at p. 153.)
This expansive definition of interest is required, according to the majority, not because of any evidence that Congress actually had such an idea in mind when it enacted the National Bank Act; in fact, there is not a particle of textual or legislative evidence to support such a view. Instead, the majority reasons that Congress must have intended to give “interest” such a broadened definition because limiting the word’s meaning to the one that is obvious on the face of the statute would have allowed unfriendly state legislatures to “frustrate” the rise of the national banks by passing discriminatory measures imposing low noninterest terms (such as late fee penalties) on such banks while increasing the ceilings on such charges that state banks could impose. Such a course would have led to the destruction of the national banks, the majority reasons, an outcome Congress could not have *167desired. To avoid such a result, the majority concludes, “the term ‘interest’ in section 30 of the National Bank Act should be construed to cover late payment fees . . . .” (Maj. opn., ante, at p. 153.)
Like the proverbial red thread, a misconception not only of the high court’s opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, but of the economic conditions prompting the enactment of the National Bank Act on which the Tiffany opinion rests, runs through the logic of the majority’s view. A sharp pull on this skein of error—by demonstrating the misreading of Tiffany and of the larger historical context of American banking in the immediate aftermath of the Civil War—and the fabric of the opinion unravels.
A
We begin with the text of the statute itself. In enacting what was originally section 30 of the National Bank Act in 1864, Congress used the word “interest” a total of four times. It used the word “rate,” however, a total of nine times, more than twice as often as it used the word “interest.” Indeed, “interest” does not appear in a single sentence of section 30 unaccompanied by the word “rate”', the statute commonly links directly the two ideas, referring to “rates of interest” or “interest at a rate of,” although sometimes it refers to “rates” without referring to “interest” in the same sentence. Whatever broader currency the word “interest” may have had in American society at large in the mid-19th century, uncoupled from the notion of rates, it is highly likely that in enacting section 30, Congress actually had in its collective mind a much narrower and more precise understanding, the one the majority calls the “popular sense” of the word: a sum linked to the lending of money calculated at a rate or a percentage of the loan over time.
Such a self-evident and unambiguous use of the term should mark the end of the inquiry, the question before this court being, after all, the antiquarian one of the content Congress probably ascribed to a word inserted in a statute in 1864. The answer, it is evident to me, is furnished by the text of the statute itself. Another court, examining the identical question, and rejecting the very construction placed on the text by the majority, has written that “a proposition that is not obvious from the plain meaning of a statute’s language, nor from its legislative history, simply cannot be regarded as a clear manifestation of congressional intent.” (Copeland v. MBNA America, N.A. (D.Colo. 1993) 820 F.Supp. 537, 541; see also Mazaika v. Bank One, Columbus, N.A. (1994) 439 Pa.Super. 95, 110 [653 A.2d 640, 647] (in bank) [“. . . we are simply unable to find that Congress, when it used the phrase ‘interest at the rate’ in enacting Section [30] . . . intended anything other *168than the ordinary and popular meaning of the word ‘interest’, which a person of average intelligence and experience would understand. (Fn. omitted.)”].)
During the Senate debate on the bill that became the National Bank Act, moreover, the talk was of interest “rates,” not of abstract notions of interest encompassing the expansive formulation of the majority. Thus, in the midst of the debate over the bill’s terms on May 5, 1864, the senators discussed the controversial proposal whether to enact into law a national interest rate ceiling of 7 percent. Senator Grimes of Iowa sought to have the ceiling reduced to 6 percent, the figure prevailing in his state. “This bill purports to be a bill to provide a national currency, and its friends claim that it is to have a uniform operation all through the country. Let me tell the Senate how it will operate in [Iowa]. In the State of Iowa the legal rate of interest is six per cent., but where special contracts are entered into the parties can receive ten per cent. Under this bill as it stands each of these national banks can receive ten per cent, on all its discounts and all its monetary transactions, while in the adjacent States the rate will be only six per cent.” (Cong. Globe, 38th Cong., 1st Sess. (1864) p. 2123.)
After further criticizing the measure, the senator concluded, “This is no time to be increasing the rate of interest.” Senator Pomeroy of Kansas disagreed: “I only desire to say that I think a uniform rate of interest is desirable and should be fixed in this bill, if it is to be a bill to establish a national currency . . . .” Senator Trumbull disagreed with both of his colleagues. “Money is worth more in some portions of the country than others. Money commands a higher rate of interest in new sections of the country than it does in the old. . . . This provision . . . allows the same rate of interest in a State which is allowed by the laws of the State.” (Cong. Globe, 38th Cong., 1st Sess., supra, at pp. 2123-2124, italics added throughout.)
Examples could be multiplied, but there would be little point. The fact is that there is literally nothing in the reported debates on the bill that became the National Bank Act of 1864 to suggest that the drafters of the measure had anything in mind beyond the common sense, conventional notion of “rates of interest.” The record of the congressional debates on the meaning of “interest” as Congress used it in the National Bank Act is thus further evidence—in addition to the unambiguous text of the statute itself—that Congress had in mind a notion of interest that was linked ineluctably to rates. (See Cong. Globe, 38th Cong., 1st. Sess., supra, at pp. 2123-2125.)
B
Indeed, the repeated and uniform linkage of “interest” with “rates of interest” in both statutory text and Senate debate is so clear and unwavering *169that even the majority quickly abandons any pretense of adhering to the plain meaning of the statute. Instead, it falls back on a kind of argument from necessity which it then projects onto an undisclosed consciousness of the Civil War Congress. The source of this line of argument is the high court’s opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, mobilized by the majority as the pivot for an expansive reading of the word “interest” as it appears in section 30 of the National Bank Act.
Here is the argument deployed by the majority to support its central conclusion: “Thus, a state could allow periodic percentage charges payable absolutely by maturity for all lenders, including national banks, but fix them at a rate so low that they could lend only at a loss. It might then allow late payment fees to some lenders, not including national banks, at a level high enough that they could lend at a profit. Such a result would be untenable.” (Maj. opn., ante, at p. 154, italics in original.)
A fair reading of the opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, however demonstrates that the high court, writing a mere nine years after the passage of the National Bank Act, alluded not to Congress’s fear of the specter of discriminatory rate setting against national banks by the states, but to its concern that state legislatures might abolish all banks, state and federal. Such an anxiety over the fate of the entire business of banking lends no support to the majority’s claim that Congress must have been motivated to provide against the contingency of discriminatory rate setting by incorporating (with conspicuous silence) an understanding of “interest” that includes charges unrelated to what is the obvious subject of section 30—that is, “rates of interest.”
Here is the critical text of Justice Strong’s opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, upon which the majority relies for its central tenet that Congress must have had in mind a notion of interest broad enough to encompass not just rates of interest, but noninterest-rate credit card terms including, in this case, late payment penalties, in order to avoid state discrimination against national banks: “It was expected that [national banks] would come into competition with State banks, and it was intended to give them at least equal advantages in such competition. In order to accomplish this they were empowered to reserve interest at the same rates . . . which were allowed to similar State institutions. This was considered indispensable to protect them against possible unfriendly State legislation. Obviously, if State statutes should allow [state] banks ... a rate of interest greater than the ordinary rate allowed to natural persons, National [banks] could not compete with them, unless allowed the same. On the other hand, if such [national banks] were restricted to the rates allowed ... to [state] banks *170. . . , unfriendly legislation might make their existence in the state impossible. A rate of interest might be prescribed so low that banking could not be carried on, except at a certain loss.” (85 U.S. (18 Wall.) at pp. 412-413 [21 L.Ed. at pp. 863-864], italics added.)
I suppose it is possible to construe this text as referring to the threat of state discrimination against national banks by the setting of interest rate differentials that favored state banks. In point of historical fact, however, the greater likelihood is that Justice Strong had in mind what the words of his opinion literally convey: that the states might enact legislation that, far from favoring state banks over national banks, would sweep away all banks, leaving the business of lending (and the circulation of bank notes) to nonbank lenders. In other words, just as Justice Strong wrote in Tiffany, supra, 85 U.S. (18 Wall.) 409, 413 [21 L.Ed. at pp. 862, 864], italics added, that “banking [not merely national banking] could not be carried on” in the face of across-the-board interest rate ceilings that would have made the business of banking itself a losing proposition. The radical policy of prohibiting banks had in fact been adopted in some of the states—Texas (1845), and Iowa and Arkansas (both in 1846), among them—in the not too distant past. (See Hackley, Our Baffling Banking System (1966) 52 Va. L.Rev. 565, 570 and fn. 20 (hereafter Hackley); Hammond, Banks and Politics in America (1957) p. 614.)
At this historical distance, it is easy to lose sight of the fact that in 1864 the history of American banking had been one of decades of financial turmoil, cyclical bank “panics,” the sudden appearance and disappearance of “wildcat” banks, the absence of a national currency (and of national banks), and volatile, often worthless notes issued by private state-chartered banks. The country’s first “central bank,” the Bank of the United States, had been destroyed in its second incarnation by President Jackson’s veto of its charter renewal in 1832. The following period, roughly from 1836 to 1863, often referred to as the era of “free banking,” was one of the most chaotic in American financial history, an era in which all banking was carried on by state chartered banks that issued their own currencies and in which the very idea of banks and bankers came to be distrusted by many Americans.3 (Hackley, supra, 52 Va. L.Rev. at p. 570; Hammond, Banks and Politics in America, supra, at pp. 605-622, 725-26; Million, The Debate on the National Bank Act of 1863, supra, 2 J. of Pol. Economy 251, 261-266.)
*171The debased currencies of the state banks, together with the federal government’s complete withdrawal from the field of financial regulation during the Jackson administration, contributed in the minds of many to the rebellion of the slave-holding states. With enormous sums suddenly and urgently required by the national government to pay its troops and finance the widening war, it is little wonder that Salmon Chase, Lincoln’s Treasury Secretary, should call on Congress to enact legislation establishing a uniform national currency to be issued by federally chartered banks. Thus the immediate impetus for the National Bank Act.4
Against this backdrop, what Congress likely feared was not that the states would favor their local banks over those holding newly issued federal charters by setting discriminatory interest rates, but that the institution of private commercial banking itself would be abandoned in favor of other forms of lending in a country that, though still in its financial youth, had had much bitter experience with a system that relied on largely unregulated state-chartered banks for its medium of exchange. It was thus to induce state banks to convert their charters and to protect the future of banking itself, that Congress tied national bank interest rate ceilings to those set by local legislatures for lenders other than state banks.5
That linkage, however, gives no support to the majority’s argument that Congress must have intended to invest the term “interest” with a meaning that is broader than the text of the statute and legislative materials will *172support. Because Congress’s aim in allowing national banks to adopt the highest rate of interest charged by nonbank lenders was not to head off local efforts to destroy national banks by setting discriminatory fees favoring state banks, there is no historical or legal basis for the conclusion that the term “ ‘interest’ in section 30 . . . should be construed to cover late payment fees . . . .” (Maj. opn., ante, at p. 153.)
C
There is another thread prominent in the intellectual fabric of the immediate post-Civil War era that reinforces the view that in its opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, the high court had in mind, not discriminatory fee differentials directed at national banks, but the legislative abolition of banks themselves. That is the already well-rooted constitutional doctrine, perhaps then even more vivid in the minds of lawyers and judges than it is today, of federal instrumentalities and their correlative immunity from impairment by state laws. It was, after all, two cases involving the Bank of the United States that Chief Justice Marshall had chosen as the vehicles to establish the proposition that “the bank is an instrument which is ‘necessary and proper for carrying into effect the powers vested in the government of the United States’ ” and was thus immune from state taxation. (Osborn v. Bank of the United States (1824) 22 U.S. (9 Wheat.) 738, 860 [6 L.Ed. 204, 233]; see also McCulloch v. Maryland (1819) 17 U.S. (4 Wheat.) 316, 436-437 [4 L.Ed. 579, 609] [“. . . this is a tax on the operations of the bank, and is, consequently, a tax on the operation of an instrument employed by the government of the Union to carry its powers into execution. Such a tax must be unconstitutional.”].)
It was only two years after Tiffany, supra, 85 U.S. (18 Wall.) 409, was decided that the court decided the Dearing case (Farmers', etc. Nat. Bank v. Dearing (1875) 91 U.S. (1 Otto) 29 [23 L.Ed. 196]), reaffirming the view that the privately owned national banks were “instruments designed to be used to aid the government in the administration of an important branch of the public service.” (Id. at p. 33 [23 L.Ed. at p. 199].) There is thus no doubt whatever that not only Justice Strong and the high court of 1873, but the Congress of 1864, well knew that no state constitutionally could enact measures, like differential rate ceilings, which discriminated against the national banks as fiscal instrumentalities of the national government. Given that widespread recognition in legislative and legal circles, there is simply no warrant for the inference by the majority that Congress must have used the word “interest” in a sense broader than the text will support in order to neutralize state efforts to favor state over federally chartered banks.
*173II
The second line of argument anchoring the majority’s broadened reading of the word “interest” in section 30 is derived from the comparatively recent decision in Marquette Nat. Bank v. First of Omaha Corp. (1978) 439 U.S. 299 [58 L.Ed.2d 534, 99 S.Ct. 540] (Marquette)—the only high court opinion that speaks to the doctrine of “exportation” as a species of federal preemption. (See maj. opn., ante, at pp. 148-149.) Although the majority avoids any express reference to the context in which the case before us arises and to the forces that drive both it and companion litigation across the nation—the recent emergence of truly “interstate” or nationwide banking in the area of consumer financial services—they rely heavily on the high court’s reasoning in Marquette to support the conclusion that inequalities between late charge ceilings set by California and those allowed Citibank by the South Dakota Legislature have “always been implicit in the structure of the National Bank Act.” (Maj. opn., ante, at p. 163.) They are “implicit,” of course, only if one accepts the flawed reasoning of the majority that when Congress spoke of “interest rates” it really meant something more than that, namely, noninterest-rate charges, including late payment penalties.
The vice of this reasoning is that neither the high court in Marquette, supra, 439 U.S. 299, nor the Congress of 1864 wrote or legislated against a backdrop of interstate banking, an arrangement that did not exist even in 1978 and was inconceivable in 1864. Instead, both the Marquette court and the Congress that debated and passed the National Bank Act acted against the backdrop of a geographically confined, intrastate system that has characterized American banking since the founding of the nation and only now appears to be in a state of rapid disintegration. (See, e.g., Miller, Interstate Banking in the Court (1985) Sup. Ct. Rev. 179; Huertas, The Regulation of Financial Institutions: A Historical Perspective on Current Issues in Financial Services: The Changing Institutions and Government Policy (Benston edit. 1983) pp. 26-27; Ginsburg, Interstate Banking, supra, 9 Hofstra L.Rev. 1133; see also Bank Regulators Set Interstate Guidelines, L.A. Times (May 9, 1995) p. Cl, col. 6) [state bank regulators disclose new guidelines putting into effect laws allowing interstate banking].)
The opinion in Marquette, supra, 439 U.S 299, of course, addressed only the question of interest rates', it does not hint at, much less embrace, the Pickwickian notion of “interest” embraced by the majority. Moreover, the high court’s statement in Marquette that in enacting the National Bank Act, Congress debated the measure “in the context of a developed interstate loan market” (id. at p. 317 [58 L.Ed.2d at p. 547]), is of little value to the majority’s reasoning. It simply does not follow from the premise of *174Marquette—that because the Congress of 1864 was aware of the regional nature of the American economy, inequalities in interstate interest rates were implicit in section 30—that Congress must have used the term “interest” in section 30 to include noninterest-rate credit terms such as late payment penalties.
Given the system of regional banking that even today continues to be the prevailing pattern, it is evident that in 1864 American banks did not “export” rates across state lines or that they even conceived of doing so. Congress thus could not have legislated with an awareness, however unarticulated, of “true” interstate banking as we are only coming to perceive it, however dimly, today. The pressures that drive the economic behavior of Citibank and like banks (and that lead to class actions such as this one) were unknown to the world of American banking until around 20 years ago. Because the Congress of the Civil War era could not have foreseen such developments, it could not have enacted section 30 of the National Bank Act with the idea of “interest” in mind that the majority attributes to it, that is, one that permits the exportation of credit terms—including late payment penalties—unrelated to interest rates allowed by the exporting bank’s home state.
In short, the “exportation” of interest rates is a phenomenon associated with the contemporaneous rise of true interstate banking. There is certainly no hint of it in the Tiffany opinion, which deals solely with interest rates in the intrastate context. The word itself, in the context of banking, does not appear in the case law until around the time of the high court’s opinion in Marquette, supra, 439 U.S. 299, in 1978. (See generally, Clark, The Law of Bank Deposits (3d ed. 1990) § 11.09[2], pp. 11-45 to 11-48.) The result in Marquette, although based in part on the conclusion that the Civil War Congress was sensitive to the development of a system of regional banking (439 U.S. at p. 317 [58 L.Ed.2d at p. 547]), does not depend on the entirely retrospective idea that the Congress that enacted section 30 was in any sense aware of the future exfoliation of interstate banking a century and a quarter later, with its manifold pressures to nationalize credit card interest rates and consumer credit terms generally. (See generally, Ginsburg, Interstate Banking, supra, 9 Hofstra L.Rev. at p. 1135.)
It is clear, in short, that the majority reads back into the intent of the Civil War Congress an anachronistic awareness of the imperatives of modem interstate banking, an awareness that, because it did not exist at the time, could not have weighed on Congress’s collective consciousness. It is equally clear from the historical materials that Congress was concerned with ensuring the survival of the newly established national banks in the context of a banking industry geographically confined within a single state and operating *175through single outlets. To thus suggest, as the majority does, that the power of South Dakota to dictate non-interest-rate terms to California credit card holders in violation of California law is “implicit” in the word “interest” as it was meant by the framers of the National Bank Act represents an account of the history of American banking that cannot be squared with the reality.
Ill
Having relied on the foregoing materials and arguments—the clear and unambiguous text of the statute itself, the tenor of the debate in the Senate, the high court’s opinion in Tiffany, supra, 85 U.S. (18 Wall.) 409, the bitter national experience against which these events took place, and modem patterns in the nation’s banking marketplace—it must be said that, in the end, the tmth of none of these matters need be established in order to undermine the majority’s conclusion. Because the principle of exportation is a branch of the doctrine of federal preemption, the governing test requires only a showing that the purpose ascribed to Congress by the majority is less than “clear and manifest.” (Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516 [120 L.Ed.2d 407, 422, 112 S.Ct. 2608, 2617]; Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1066 [31 Cal.Rptr.2d 358, 875 P.2d 73].)
So solicitous has Congress historically been of the interests of the states in the regulation of banking, both state and federally chartered, that the high court has adopted an especially restrictive standard of preemption by which to judge federal laws that impact state regulation of federal banks. That test, announced by the high court at least a century ago in such cases as McClellan v. Chipman (1896) 164 U.S. 347 [41 L.Ed. 461, 17 S.Ct. 85], requires the invalidation of a state law only where it “ ‘incapacitates the [national] banks from discharging their duties to the government . . . .’” (Id. at p. 357 [41 L.Ed. at p. 465]; see also Anderson Nat. Bank v. Luckett (1944) 321 U.S. 233, 248 [88 L.Ed. 692, 705, 64 S.Ct. 599, 151 A.L.R. 824] [invalidation only where state laws “infringe the national banking laws or impose an undue burden on the performance of the banks’ functions”]; Lewis v. Fidelity Co. (1934) 292 U.S. 559, 566 [78 L.Ed. 1425, 1431, 54 S.Ct. 848, 92 A.L.R. 794] [subject to state law unless it “interferes with the purposes of its creation, or destroys its efficiency, or is in conflict with a paramount federal law”]; National Bank v. Commonwealth (1870) 76 U.S. (9 Wall.) 353, 362 [19 L.Ed. 701, 703]; Davis v. Elmira Sav. Bank (1896) 161 U.S. 275, 283 [40 L.Ed. 700, 701, 16 S.Ct. 502]; see also Scott, The Patchwork Quilt: State and Federal Roles in Bank Regulation (1979) 32 Stan. L.Rev. 687, 690-695.)
*176The preemption test specially applicable to state banking laws as they affect national banks, reflecting as it does a generous deference to state banking laws in the regulation of federally chartered banks, is consistent with the long history of the dual banking system, one feature of which is that “[njational banks ‘are subject to the laws of the State and are governed in their daily course of business far more by the laws of the State than of the nation.’ ” (McClellan v. Chipman, supra, 164 U.S. at pp. 356-357 [41 L.Ed.2d at p. 465], quoting National Bank v. Commonwealth (1870) 76 U.S. (9 Wall.) 353, 362 [19 L.Ed. 701, 703].) As we said of the dual system in Perdue v. Crocker National Bank (1985) 38 Cal.3d 913 [216 Cal.Rptr. 345, 702 P.2d 503], “ ‘[w]hatever may be the history of federal-state relations in other fields, regulation of banking has been one of dual control since the passage of the first National Bank Act in 1863. ... In only a few instances has Congress explicitly preempted state regulation of national banks. More commonly, it has been left to the courts to delineate the proper boundaries of federal and state supervision. [H The judicial test has been a tolerant one. [National banks’] right to contract, collect debts, and acquire and transfer property are all based on state law.’ [Citation.] Thus the rule is that state laws apply . . . .” (Id. at p. 937, quoting National State Bank, Elizabeth, N.J. v. Long (3d Cir. 1980) 630 F.2d 981, 985.)
The California statute nominally at issue in this case—section 1671, subdivisions (c) and (d), of the Civil Code—can hardly be said to fail to pass constitutional muster under the governing test. Certainly on the basis of the text of section 30 alone, Congress’s intent to displace credit terms other than interest rates applicable to out-of-state national banks is far less than “clear and manifest.” Even more pronounced is the failure of Citibank—which bears the burden of demonstrating federal preemption (see Perdue v. Crocker National Bank, supra, 38 Cal.3d at p. 937)—to establish that application of California’s ban on late charge fees unrelated to actual damages will in any sense “incapacitate” it from carrying out its duties as a federal instrumentality.
Conclusion
Professor Geoffrey Miller, an authority on the American banking system and its history, commenting on the revolution sweeping the industry, has observed that “It is sobering, if edifying, to realize that banking, the world’s most regulated industry, is evolving in almost blithe disregard of regulatory constraints. The industry has changed through the use of previous dormant statutory powers, through the aggressive manipulation of loopholes, or (sometimes) in apparent disregard of well-established legal principles. But legislators and the regulators have not forced the action. They have been *177relegated to cleaning up after the party—closing loopholes, ratifying changes that have occurred extralegally, or removing regulatory constraints in order to allow banks and thrift institutions to survive competition from their unregulated rivals. ‘Deregulation’ has indeed taken place, but it has not been the result of deliberate policy initiatives on the part of the legislative or executive branches.” (Miller, Interstate Banking in the Court, supra, 1985 Sup. Ct. Rev. at p. 180.)
It is difficult to imagine a more classic example of this diagnosis than the case before us. Late payment charges exacted by credit card issuing banks totaled almost $2 billion in 1992, according to one industry source. (Credit Card News (Apr. 1, 1994) at p. 2.) A large part of this revenue, from what one authority has called the “massive interstate credit card exportation phenomenon,” has gone to Citibank, easily the dominant credit card issuer in the interstate market, by exploiting what can only be called a loophole in the interstices of federal-state banking regulation. (See Burgess & Ciolfi, Exportation or Exploitation? A State Regulator’s View of Interstate Credit Card Transactions, supra, 42 Bus. Law. at p. 936; see also the study, General Accounting Office, U.S. Credit Card Industry: Competitive Developments Need to be Closely Monitored (Apr. 1994) p. 27 [Citibank is the single largest issuer of Visa and Mastercard with over $35 billion in billings.].)
However valuable to the economy of South Dakota, that scheme is in derogation of the right of the California Legislature to ensure the welfare of its residents in their credit dealings, more or less as it sees fit. To paraphrase the high court’s opinion in Marquette, supra, 439 U.S. at page 319 [58 L.Ed.2d at page 548], “any plea to alter § [30] ... is better addressed to the wisdom of Congress than to the judgment of this Court.” It is not for us to condone an evasion of California’s laws or the primacy of its lawmaking powers by the judicial legerdemain embraced by the majority.

Examining the shifting terrain of modem American banking in 1981, Judge Douglas Ginsburg wrote that “We have already seen Citicorp relocating some of its retail operations in South Dakota, and the Chase Manhattan and Morgan banks undertaking similar moves to Delaware .... In return for jobs and taxes, these jurisdictions have traded local entry rights and powers, but in each case their real purpose is to serve as a base state for [national] retail banking: the national charter enables the banks to extend credit to residents of other states at their new ‘home’ state interest rates, and newly provided state laws make these interest rates unlimited.” (Ginsburg, Interstate Banking (1981) 9 Hofstra L.Rev. 1133, 1370, fns. omitted.)

It is worth noting that the power of the South Dakota Legislature to affect the interests of California credit card holders endorsed by the majority is not limited to the setting (or the removal) of ceilings on late payment penalties; it encompass as well the manipulation of the following credit card charges: annual fees, grace periods, conditions of default, changes in terms provisions, bad check charges, and restrictions on the imposition of attorney fees and collection costs. (See Burgess & Ciolfi, Exportation or Exploitation? A State Regulator’s View of Interstate Credit Card Transactions (1987) 42 Bus. Law. 929, 930.) As the majority point out, the Legislature enacted a measure effective January 1, 1995, adding division 1.1 to the Financial Code, dealing with the setting of fees in consumer credit transactions. (See maj. opn., ante, at p. 145, fn. 2.) Notwithstanding this recent change, the federalist question remains not how the Legislature has decided to regulate consumer financial services, but the extent of its power to act as it sees fit.

A vivid sense of what must have seemed the financial chaos surrounding the most everyday affairs of the average citizen can be gained from the observations of a writer in the January 1863 issue of Merchants’ Magazine describing the currency of the West as including “the ‘shinplasters’ of Michigan, the ‘wild-cats’ of Georgia ... the ‘red-dogs of Indiana and Nebraska, the miserably engraved ‘rags’ of North Carolina and Kentucky . . . and the not-soon-to-be-forgotten ‘stumptail’ of Illinois and Wisconsin . . . .” (Quoted in Million, The Debate on the National Bank Act of1863 (1894) 2 J. of Pol. Economy 251, 264, fn. 2.) In *171an era of ubiquitous Federal Reserve notes, it requires an act of imagination to realize that these characterizations were applied to what at the time passed for money.

To Secretary Chase and others, one of the central objectives of the National Bank Act and allied legislation was the destruction of the state banking system and the assumption of federal control of the nation’s banking, a condition that almost came to pass after Congress levied a 10 percent tax on state bank notes in 1865, prompting most of the state banks to convert to federal charters and marking the end of the era of state bank notes. Between 1864 and 1869, the number of state banks fell from a high of 1,089 to a low of 259, while national banks increased from 467 to 1,617. (See Anderson, Federal and State Control of Banking (1934) pp. 72-74; Bedford, Dual Banking: A Case Study in Federalism (1966) 31 Law & Contemp. Probs. 749, 755.) State banks launched a comeback of sorts over the following decades, primarily because of the increasing importance of banks drafts in lieu of money, eventually achieving a rough equilibrium with their national competitors. It is this historically inadvertent coexistence of state and federally chartered banks in the aftermath of the National Bank Act that has come to be referred to as the “dual” banking system. (See, e.g., Hackley, supra, 52 Va. L.Rev. 565, 572.)

As one comment has observed, at the time the Tiffany opinion was written, national banks outnumbered state banks by a ratio of seven to one, the latter being in a general state of collapse in the aftermath of the federal impost on their circulating notes. Faced with the impending “nationalization” of banking, “it is not inconceivable that states would enact retaliatory usury laws so that profitable loans could be made only by non-bank lenders.” (Comment: Extension of the Most Favored Lender Doctrine Under Federal Usury Law: A Contrary View (1982) 27 Vill. L.Rev. 1077, 1085, fn. omitted.)