People v. Applied Card Systems, Inc., 11 N.Y.3d 105 (2008)

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The federal Truth-in-Lending Act (TILA) does not preempt state laws, such as New York’s Executive Law and Consumer Protection Act, that prohibit fraud, deception, and false advertising in credit card solicitations, as these laws do not relate to the specific disclosure requirements mandated by TILA.

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Summary

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The New York Attorney General sued Cross Country Bank (CCB) and Applied Card Systems (ACS) for deceptive credit card practices. The core issue was whether TILA preempted New York’s consumer protection laws. The court held that TILA does not preempt state laws prohibiting fraud and deception, as these laws don’t dictate the format, content, or manner of TILA-required disclosures. However, the court also found that a prior class-action settlement barred the Attorney General from seeking restitution for certain consumers who were part of that settlement. The decision clarifies the scope of TILA preemption and the application of res judicata in the context of state enforcement actions.

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Facts

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Cross Country Bank (CCB) solicited subprime consumers with credit cards, often misrepresenting credit limits and obscuring the impact of fees on available credit. Applied Card Systems (ACS) provided debt collection services for CCB. The Attorney General alleged that CCB misrepresented credit limits (