(CN) – The 9th Circuit on Monday revived a class action against U.S. Bank over post-repossession notices, finding that a California consumer protection law is not pre-empted by federal law.
Jose Aguayo sued the bank on behalf of a proposed class in 2007, after the bank repossessed and sold his Ford Expedition. The sale didn’t bring enough to cover the initial loan, so the bank charged Aguayo for the remainder.
Aguayo claimed in federal court in California that he did not have to pay the deficiency because U.S. Bank’s post-repossession notice failed to meet the requirements of the Rees-Levering Act, a state law meant to protect consumers from “excessive charges” and that “requires full disclosure of all items of cost at all points in the life of a vehicle purchase transaction,” according to the ruling. The bank countered that the state law was pre-empted by the National Bank Act (NBA) because it interfered with the “federal authority to carry on the business of banking free from state-law restrictions.”
Senior U.S District Judge Thomas Whelan agreed with the bank and dismissed the case, finding that, as a “credit-related” document, the post-repossession notice fell under federal law.
A three-judge panel of 9th Circuit judges sitting in Pasadena reversed on appeal.
The unanimous panel found that the lower court had overlooked the importance of the banking law’s savings clause, which bars pre-emption of state laws relating to contracts and debt collection. The judges also found that the bank’s notices were not “credit-related documents.”
“The savings clause explicitly lists state laws that are not pre-empted, including state laws pertaining to ‘contracts’ and ‘rights to collect debts,'” wrote U.S. District Judge Jack Zouhary, sitting on the panel by designation from the Northern District of Ohio. “Because the district court erred in refusing to apply the regulation’s savings clause, and because the Rees-Levering post-repossession notices are ‘disclosures’ that would not be considered ‘credit-related documents,’ we reverse.”