Opinion No. (2002)

BILL LOCKYER Attorney General GREGORY L. GONOT Deputy Attorney General THE HONORABLE MICHAEL J. MACHADO, MEMBER OF THE STATE SENATE, has requested an opinion on the following question: May a financial institution that issues credit cards charge a cardholder a service fee when it creates a demand draft for presentation to the cardholder's bank for payment of a current or past due credit card obligation if charging the fee is authorized in the credit card agreement? CONCLUSION A financial institution that issues credit cards may charge a cardholder a service fee when it creates a demand draft for presentation to the cardholder's bank for payment of a current or past due credit card obligation if charging the fee is authorized in the credit card agreement. ANALYSIS The question presented for analysis concerns an arrangement whereby a financial institution that issues credit cards ("creditor") is given permission by a cardholder to create a "demand draft" for presentation to the cardholder's bank to pay a current or past due credit card obligation. The credit card agreement may describe the procedure as follows: "From time to time we may permit you to make a payment over the telephone…