Regulation of Unfair Bank Fees in the United States and the European Union: Current Trends and a Proposal for Reform Prof. Arnold S. Rosenberg Thomas Jefferson School of Law San Diego, California Introduction Due to the legislative power of the banking industry, the United States (“U.S.”) federal government recently has been more reluctant to place limits on bank fees and charges than the European Union (“E.U.”). A trend by the courts of several American states in the 1980’s and early 1990’s toward striking down excessive bank fees charged to consumers, such as overdraft charges and late fees, through the application of “Little FTC1 Acts” such as the California Unfair Business Practices Act, Cal. Bus. & Profs. Code §17200 et seq., has stalled due to the Supreme Court’s decision in Smiley v. Citibank (South Dakota), N.A.,2 the recent assertion by the Office of the Comptroller of the Currency of federal preemption of state laws on the subject,3 and legislative amendments, particularly in California, narrowing the remedial provisions and standing to sue under Little FTC Acts.4 Meanwhile, the E.U. has been moving in the opposite direction. A casual reader of the Unfair Commercial Practices Directive adopted by the E.U. in May 2005 might think it is directed only at the sale of goods, because the Directive frequently applies only 1 “FTC” refers to the Federal Trade Commission, a federal administrative agency. The FTC Act, 15 U.S.C. §1 et seq., is a federal statute that is enforceable only by the FTC and lacks any private right of action for consumers. Many states, such as California and Texas, have enacted “Little FTC Acts” that unlike their federal counterpart, include private rights of action. See infra. 2 517 U.S. 735, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996). 3 See n. 37, infra. 4 On California’s Proposition 64, which repealed the private attorney general provisions of California’s “Little FTC Act,” see the inaptly named Note: California’s Unfair Competition Law- Making Sure the Avenger is Not Guilty of the Greater Crime, 41 SAN DIEGO L. REV. 1833 (2004). 2 to “products.” However, due to its expansive definition of “product” as including services, the Directive covers fees for bank services. These fees are also governed by the Distance Marketing of Financial Services Directive of 1998, the Unfair Contract Terms Directive of 1993, and two sets of regulations pursuant to the 1993 Directive adopted in 1994 and 1999. This paper will discuss these divergent trends, the factors that have contributed to them, and the rationales for and against bank fee regulation. It also will set forth a proposed solution to the problem of unfair bank fees through regulatory standardization and review of consumer contract forms in the financial services industry. ID: 37065 Autor(en): iff Erscheinungsdatum: 21.03.06     Prof. Arnold S. Rosenberg ‘Regulation of unfair bank fees in the EU and US’ (260561 Bytes) Prof. Arnold S. Rosenberg PowerPoint presentation (172590 Bytes)

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