A District Court judge in New York has granted a defendant’s motion to dismiss a class-action lawsuit over a bank’s practice of charging $3 for its customers to receive paper statements, ruling that a state law that banned charging a fee for receiving paper statements is unconstitutional.
The background: The plaintiff, a New York customer who maintained a checking account with the defendant, alleged that the bank’s $3 monthly paper statement fee violated Section 399-zzz of New York’s General Business Law, which prohibits businesses from charging consumers an additional fee when they choose to receive paper billing statements.
- Section 399-zzz also provides that violations constitute deceptive acts enforceable under Section 349 of the General Business Law. The plaintiff argued that by charging the fee, the defendant engaged in a deceptive practice and sought to bring the case as a putative class action.
- The defendant moved to dismiss on multiple grounds, including federal preemption under the National Bank Act and a constitutional challenge to the statute itself.
The ruling: Judge Hector Gonzalez of the District Court for the Eastern District of New York concluded that Section 399-zzz regulates commercial speech because it governs how businesses may structure and describe fees and incentives tied to billing options.
- Under the statute, businesses cannot charge a fee for paper statements but may offer a “credit or other incentive” to customers who opt for paperless delivery. The judge characterized this as “opposite sides of the same coin,” finding little practical distinction between prohibiting a fee and allowing an incentive.
- Applying the Central Hudson test for commercial speech, Judge Gonzalez acknowledged that consumer protection is a substantial governmental interest. However, he found that the statute did not directly advance that interest and had only a “de minimis effect” on consumer choice.
- The judge further rejected the plaintiff’s argument that the unconstitutional portion of the statute could be severed, noting that the legislative history showed that permitting credits and incentives was an integral part of the statutory scheme.
- Because Section 399-zzz was found unconstitutional, the plaintiff’s derivative claim under Section 349 necessarily failed. The judge dismissed the complaint with prejudice, concluding that amendment would be futile given the substantive constitutional defect.
