Procedural Posture

Appellant consumers sought review of a judgment of the Superior Court of Santa Barbara County (California), which dismissed a class action complaint against respondent national banks for conversion and other claims including violations of the unfair competition law, Bus. & Prof. Code, § 17200 et seq., the Consumers Legal Remedies Act, Civ. Code, § 1750 et seq., and the Rosenthal Fair Debt Collection Practices Act, Civ. Code, § 1788 et seq.

Overview: duty to mitigate damages tort law

The complaint alleged that the banks included provisions in tax refund anticipation loan (RAL) applications that authorized them to seize a tax refund and apply it to prior outstanding RAL debts owed to other RAL lenders and that such a practice was unfair, deceptive, and unlawful. The trial court ruled that the consumers' action was preempted by regulations issued under the authority of 12 U.S.C. § 24, which included the visitorial powers regulation, 12 C.F.R. § 7.4000(a), the deposit-taking regulation, 12 C.F.R. § 7.4007(b)(2), and the non-real estate lending regulation, 12 C.F.R. § 7.4008(d)(2)(ii). The court reversed, holding that the visitorial powers doctrine did not preempt the claims because private parties' actions were not visitations under 12 U.S.C. § 484(a). Further, California's consumer protection laws had no more than an incidental effect on the banks' deposit-taking or non-real estate lending powers, within the meaning of 12 C.F.R. §§ 7.4007(c), 7.4008(e), and claims based on violations of federal laws did not obstruct the banks' activities. The mitigation of risks of third parties was beyond the scope of the non-real estate lending regulation.

Outcome

The court reversed the judgment and remanded to the trial court.