Banks want W.Va. AG's lawsuit in federal court

Jessica M. Karmasek Oct. 6, 2011, 10:49am


CHARLESTON, W.Va. (Legal Newsline) - A half-dozen banks accused of violating West Virginia's Consumer Credit and Protection Act have asked a federal court to hear the lawsuits filed against them by West Virginia Attorney General Darrell McGraw.

At issue are the banks' payment protection products.

In August, McGraw's office filed lawsuits against Bank of America Corp., Citigroup Inc., Discover Financial Services Inc., First Premier Bank, GE Money Bank, JPMorgan Chase & Co. and World Financial Network National Bank in West Virginia's Fifth Judicial Circuit Court.

At the time, the Attorney General's Office argued that the Mason County venue was proper because the defendants all conduct business in the county and the cause of action arose, in part, in the county.

However, the banks, in separate filings last week and Monday, have asked that the lawsuits be removed to the U.S. District Court for the Southern District of West Virginia.

They argue, among other things, that there is the presence of a "substantial federal question."

According to one notice filed by Bank of America, the attorney general's challenges to credit protection fees are "completely preempted" and therefore arise under federal law. The fees, the bank contends, are a form of "interest" within the meaning of two sections of the National Bank Act.

Credit protection products are marketed as ways for consumers to protect themselves from fraud, unauthorized charges, or to increase their financial security.

The products -- also known as debt cancellation contracts and debt suspension agreements -- cancel or suspend a credit card holder's obligation to repay his or her credit card debt under circumstances including the death, disability or involuntary unemployment of the cardholder.

In exchange for an agreement to cancel or suspend debt, the cardholder pays a monthly fee calculated as a percentage of the outstanding account balance on the credit card account.

McGraw's office alleges that the banks' payment protection products are "essentially worthless" and violate the state's Consumer Credit and Protection Act.

The attorney general also alleges that the products' disclosures are inadequate.

His office is seeking civil penalties against the banks under the WVCCPA, including recovery of "excess charges," restitution, injunctive and declaratory relief, and attorneys fees and costs.

From Legal Newsline: Reach Jessica Karmasek by email at

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