Jackson v. Pasadena Receivables
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HEADNOTE: Re: Sheri Jackson v. Pasadena Receivables, Inc., No. 106, September Term, 2006 Choice of law provision in credit card agreement, calling for South Dakota law to be applied to disputes arising under the agreement or in connection with the use of he card, is valid and enforceable in Maryland. Provision of Maryland Retail Credit Account Law, Commercial Law Art. § 12-503(c)(1), requiring that credit card agreement be signed by buyer or that issuer make reasonable attempt to obtain buyer s signature dos not constitute fundamental policy of Maryland sufficient to override choice of law provision. IN THE COURT OF APPEALS OF MARYLAND No. 106 September Term, 2006 ______________________________________ SHERI JACKSON v. PASADENA RECEIVABLES, INC. ______________________________________ Raker Cathell Harrell Battaglia Greene Eldridge, Jo hn C. (Re tired, specially assigned) Wilner, A lan M.(R etired, specially assigned) JJ. ______________________________________ Opinion by Wilner, J. Eldridge, J. co ncurs in jud gment on ly ______________________________________ Filed: April 11, 2007 This case began as a routine collection action in the District Court to recover judgment on a $5,146 credit card debt. The debtor, Sheri Jackson, has never denied that she used the credit card to purchase the items which, together with finance charges, comprise the debt and that, at some point, she simply stopped making payments on the account. Her defense, presented entirely through counsel, was that, because she never signed the c redit card ag reement a nd the cred it card issuer, C itibank, mad e no reaso nable attempt to obtain her signature, the credit card agreement violates a provision of the Maryland Retail Credit Accounts Law (RCAL), codified at Maryland Code, § 12503(e)(1) o f the Com mercial La w Article (C L). As a re sult, Ms. Jac kson claim ed that, in accordance with CL § 12-513(a), all of the finance charges that had ever been assessed during the nine years that she used the credit card were forfeited. Jackson made no effort to calculate the amount of those charges, so, except for an unswo rn assertion b y Pasadena that they did no t exceed $ 1,745, the re cord is silent as to what they are what proportion of the acknowledged $5,146 balance they might be. No counter-claim was f iled by Jackson. She simply argued that, because of the statutory violation, neith er Citibank nor the plain tiff in the actio n, Pasaden a Receiv ables, Inc., to which Citibank had assigned the account, was entitled to recover any part of the $5,146 balanc e. The District Court found no merit in Jackson s defense and entered judgment for Pasadena. On appeal, the Circuit Court fo r Baltimore City affirmed the D istrict Court judgment. We granted certiorari and sh all affirm the judg ment o f the C ircuit Co urt. BACKGROUND Maryland s RCAL was first enacted in 1967; it now appears as title 12, subtitle 5 of the Co mmercia l Law A rticle (CL § § 12-501 through 1 2-515). Se ction 12-50 1(l) defines retail credit account as an agreement or transaction for the retail sale of goods or services, w hich is nego tiated or entere d into and p ursuant to w hich a time s ale price is established and adds that the definition includes credit card financing by a financial institution. Section 12-502(a) requires that every retail credit account established after May 31, 19 67 comp ly with the subtitle. S ection 12-5 12 provid es that [n]o act, agreement, or statement of a buyer may constitute a valid waiver of any benefit or protecti on pro vided to him un der this s ubtitle. The law establishes detailed requirements with respect to retail credit accounts, including m aximum interest that ma y be charged , information that must be disclosed to the buyer, the size of type that must be used to convey certain information, and the frequency with which information must be disclosed. The specific requirement most relevant he re is containe d in § 12-5 03(e)(1) th at a retail credit ac count agre ement sha ll be in writing and that either it shall be signed by the buyer, or the seller or financial institution shall have made a reasonable attempt to obtain the signature of the buyer to the agreement. Section 12-513(a) imposes a civil penalty for violation of the Act: if a holder violates any provision of this subtitle, no holder may collect or receive any finance charge from the buyer. -2- Jackson at some point received a credit card from Citibank, a national bank located in South Dakota. With its Statement of Claim, Citibank s assignee, Pasadena, asserted that the account was initially opened in December, 1994, but that the original application and contract had either been destroyed or lost and was unavailable. It attached a 1999 Credit Ca rd Agree ment, wh ich set forth th e terms and conditions r elating to the c redit card an d its use a nd, am ong oth er thing s, stated, u nder th e head ing A pplicab le Law , that [t]he terms and enforcement of this Agreement shall be governed by federal law and the law of Sou th Dakota, whe re we are located. Th ere is no place in the agreem ent for a signature by the holder. Jackson used the card to make purchases for approximately nine years, and, app arently withou t any objection re garding the absence o f a signed a greemen t, consiste ntly main tained a balanc e on the card sin ce then . At the time suit was filed, the balance on the account was $5,146. It was agreed that the account had never been used to obtain cash advances, but only to purchase goods and services, and that it had be en validly assigned to Pasaden a. Other than the unsw orn assertion by Jackson s counsel, there was no evidence that Jackson had not signed an application for the credit card or the original credit card agreement or that no effort had been made by Citibank to obtain her signature. Pasadena refused to stipulate to those assertio ns by cou nsel, alth ough it s attorne y acknow ledged that wo uld be h er testim ony. There never was any testimony by Jackson, however, or by anyone else. The case proceeded solely on the stipulation that Jackson had the account, that she used the account -3- to make purcha ses but not cash adva nces, that she kept a balanc e on the account o ver a nine-year period, that the principal balance on the account was $5,146, that the account had been assigned to Pasadena, and that the court could consider the documents that had been attach ed to Pasa dena s co mplaint, am ong wh ich was th e 1999 ag reement. In response to Jackson s RCAL defense, Pasadena noted the choice of law provision in the agreement and pointed out, without contradiction, that South Dakota law allows an account to be opened without a signed application. It urged as well that (1) RCAL was preempted by §§ 85 and 86 of the National Banking Act, (2) a later-enacted Maryland law, § 5-4 08 of the Cts. & J ud. Proc. Article, provides that cred it card agreements do not have to be signed by the buyer and thus, to the extent of that inconsistency, prevails over CL § 12-503(e), and (3) the finance charges that would be subject to forfeit under § 12-503(e) do not, in any event, exceed $1,745. After considering memoranda filed by the parties, the District Court found the choice-of-law argument telling and therefore held that South Dakota law was applicable. Because that law permits a credit card ac count to be opene d without a signed a pplication, the court rejected Jackson s RCAL defense and entered judgment for the agreed amount of $5,146, plus accrued interests, costs, and attorneys fees a llowed under the a greement. The co urt did not address the preemption issue or any of Pasadena s other arguments, as it was not necessary to do so. Jackson filed a motion for reconsideration, complaining that the court had -4- considered the 1999 agreement when it was apparent that the account had been opened much ea rlier. In denying th e motion, th e court rem inded Jack son that, throu gh coun sel, she had stip ulated that the court could consider th at agreem ent, which was attach ed to Pasaden a s comp laint. On appeal, the Circuit Court affirmed, for the same reason applied by the District Court. Th e court note d that the p rimary issue pre sented w as wheth er the (1999 ) credit card ag reeme nt was contro lling and the cho ice-of- law pro vision in it was e nforce able. The court answered both questions in the affirmative. As did the District Court, the Circuit Court turned to Restatem ent (Second ) of Conflicts, § 187(2), which provides that [t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied unless (a) the chosen State has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties choice, or (b) application of the law of the chosen State would be contrary to a fundamental policy of a State which has a materially greater interest than the chosen State in the determination of the particular issue. The court found neither exception applicable. DISCUSSION Althoug h there ma y be other reaso ns why Jack son s defe nse wou ld fail, we sh all follow the course of the two lower courts and base our decision on the choice of law provision in the credit card agreement. Whether or not rejection of Jackson s RCAL -5- defense would be required as well on a theory of Federal preemption, as argued by Pasadena, our enforcement of the contractual provision is clearly harmonious with the result that would obtain if we applied that doctrine.1 Jackson h as not den ied the existen ce of the 1 999 agre ement tha t was attach ed to Pasaden a s Stateme nt of Claim . Her unsw orn defen se to that agre ement is the same as to the initial agreement she never signed it and Citibank made no attempt to obtain her signature. That defense, as noted, rests principally on three provisions of RCAL: § 12- 1 It may be that CL § 12-503(e) is preempted by the National Banking Act, but the preemption argument made by Pasadena is a limited one that centers on §§ 85 and 86 of that Act (12 U.S.C. §§ 85, 86), which deal only with the amount and rate of interest that may be charged by national banks. Although it is arguable that, by precluding a national bank from rece iving any finance charges u pon a failure to obtain (or attem pt to obtain) a holder s signature, RCAL has inhibited a national bank from charging interest that § 85 allows, preemption is more likely to arise from 12 U.S.C. § 24, not mentioned by Pasaden a, which a uthorizes n ational ban ks to exercis e all incidenta l powers n ecessary to carry on the business of banking. Pursuant to that section, § 93a, authorizing the Comptroller of the Currency to adopt regulations to carry out the responsibility of the Office, and § 27, subjecting national banks to regulations issued by the Office of the Comptroller of the Currency, the OCC adopted 12 C.F.R. § 7.4008(d), which declares that state laws th at obstruct, im pair, or cond ition a nationa l bank s ab ility to fully exercise its Federally authorized non-real estate lending powers are not applicable to national banks. See 69 Fed. Reg. 1904, 1907 (Jan. 13, 2004), recognizing 12 U.S.C. 24 as the principal source of Federal au thority justifying the pr eemption of State law s that wou ld inhibit national banks from exercising that authority. Unlike other sections of RCAL (see CL §§ 12-504 - 12-506), § 12-503(e) does not purport to regulate or limit interest rates. The coalescen ce of §§ 1 2-503(e), 1 2-512, and 12-513 w ould thus se em to interf ere more w ith the broad exercise of a national bank s Federally authorized lending powers than with the rate of in terest tha t can be charge d unde r § 85. Compare 15 U.S.C. § 16 10, which is part of the Federal Truth In Lending Act. We have avoided addressing the preemption argument because (1) it is not necessary to do so, and (2) if we addressed the limited issue actually raised by Pasadena, we m ight end up with the w rong answer. -6- 503(e), which requires either that a retail credit account be signed by the buyer or that the issuer have made a reasonable attempt to obtain the buyer s signature; § 12-512, which precludes a waive r by the buyer of any protection afforded by RCAL; an d § 12-513(a), providing that if a holder violates any provision of the subtitle, no holder may collect or receive any finance charg e from the buyer. Undisputedly, the Agreement states that the terms and enforcement of the Agreement shall be governed by Federal law and the law of South Dakota. No one has claimed that there is any Federal law that would require Maryland law to be applied; indeed, in urging its preemption defense, Pasadena insists that Federal law requires application of South Dakota law. The relevant South Dakota law is S.D. Codified Laws, § 54-11-9 (2006 ): The use of an acc epted cred it card or the issu ance of a credit card agree ment and the expiration of thirty days from the date of issuanc e without w ritten notice fro m a card h older to cancel the account crea tes a binding contract betw een the card holder and the card issuer with reference to any accepted credit card, and any charges made with the authorization of the prim ary card h older. Under South Dakota law, therefore, there is no requirement that the holder sign an agreeme nt or that the issu er attempt to o btain the ho lder s signatu re. If, as clearly occurred here, the holder accepts and uses the card to charge purchases, a binding contract exists. The issue we address, then, is whether, in light of the cited sections of RCAL, the choice of law provision in the credit card agreement is valid and enforceable. -7- With limited exceptions, this Court has long recognized the ability of contracting parties to specify in their contract that the laws of a particular State will apply in any dispute over the validity, construction, or enforceability of the contract, and thereby trump the conflict of law rules that otherwise would be applied by the court. The Court first reached that conclusion in Williams v. N.Y. Life Ins. Co., 122 Md. 141, 147, 89 A. 97, 99 (1913), where we held that it was perfectly competent for the parties to a contract made in Maryland to provide that the contract was to be construed in accordance with New York law. Sixty-seven years later, in Kronov et v. Lipchin , 288 Md. 30, 43, 415 A.2d 1096, 1104 (1980), we confirmed that [i]t is now generally accepted that the parties to a contrac t may agre e as to th e law w hich w ill gover n their tra nsactio ns, even as to issues going to the validity of the contract. (Emphasis added). Citing Kronovet, we reconfirmed that principle more recently in National Glass v. J.C. Penney, 336 Md. 606, 610, 650 A.2d 246, 248 (1994 ). In both Kronovet and National Glass, the Court looked to Restatement (Second) of Conflict of Laws, § 187 a s a prop er statem ent of th at princi ple and the exc eptions to it. Like Caesar s perception of Gaul, that section of the Restatement is in three parts, two of which are relevant here. Section 187(1) is particularly applicable when only one State has an interest in the parties or the transaction but the parties choose to have the law of another State apply. That was the situation in Williams a Maryland contract in which the parties chose to have New York law apply. Section 187(1) provides: -8- The law of the state ch osen by the p arties to gove rn their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit p rovision in their a greem ent direc ted to tha t issue. The Comment to that subsection explains that the subsection is not really a choice of law pr ovision bu t one dealin g with inco rporation b y reference. T he parties m ay spell out the specific terms of the contract or, if they choose, incorporate extrinsic material by reference , including p rovisions of foreign law . If they do the latter , the forum State will apply the applicable provisions of the chosen foreign law with respect to any issue that the parties could have provided for expressly. The importance of this provision, the Comm ent adds, lies in the fact that most rules o f contract law are designe d to fill gaps in a contra ct whic h the pa rties them selves c ould ha ve filled with ex press p rovision s, including rules relating to construction, conditions, performance, frustration, and impossibility. The nature of the limitation stated in subsection (1) that the foreign law will be applied only to issues that the parties could have resolved expressly becomes clear from the Illustrations given by the authors. Parties making a contract in State X cannot include in it a term that would be unlawful in State X, and, accordingly, they may not incorporate by reference the law of another State that has no interest in the contract that would produce that result. 2 2 Two Illustrations are given, both involving a trust created in State X in which no other State has any interest. In State X, the highest permissible rate of trustees commissions is 5%; in State Y, the highest permissible rate is 4%. The trust may provide for commissions to be paid under the law of State Y, because they could have provided -9- Section 187(2), which applies where more than one State has an interest in the parties or the transaction, is the one more relevant to the case at hand. Subsection (2) provides: The law of the state ch osen by the p arties to gove rn their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either (a) the chos en state has n o substantia l relationship to the parties or th e transaction and there is n o other reas onable basis for the parties choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determina tion of the p articular issue a nd whic h, under the rule of § 188, would be the state of the applicable law in the absenc e of an effect ive cho ice of la w by the parties. 3 Subject to the two exceptions noted, this subsection is broader, as it provides for the application of the chosen law even as to matters which the parties could not have resolved by explicit provision, and that is critical here. The Comment to subsection (2) expressly for a 4% commission. In the reverse situation, however, where the highest permissible rate in State X is 4% and the highest permissible rate in State Y is 5%, effect would not be given to a provision allowing commissions in accordance with the law of State Y, because (1) State Y has no connection with the trust, and (2) the parties could not have provided for more than 4% under the law of State X. 3 Our adherence to § 187(2) is tempered by the fact that Maryland has not adopted the most significant relationship test stated in § 188 of the Restatement (Second) but has maintained its allegiance to the lex loci contractus princip le. See discussion in Motorists Ins. Co. v. Artra Group, Inc., 338 Md. 560, 659 A.2d 1295 (1995). That does not affect our adhe rence generally to § 187(2). -10- points out that the rule enunciated there applies only when two or more States have an interest in the determination of the particular issue, but, subject to that qualification, the rule of this Subsection applies when it is sought to have the chosen law determine issues which the parties could not have determined by explicit agreement directed to the particular issue, and it gives as examples questions involving capacity, formalities and substantial validity. The Comment adds: [A person] cannot dispense with formal requirements, such as that of a writing, by agreeing with the other party that the contract shall be b inding w ithout them. N or ca n he by a similar device avoid issues of substantial validity, such as wheth er the co ntract is ille gal. Usually, however, the local law of the sta te chosen b y the parties w ill be applied to regulate matters of this sort. And it will usually be applied even when to do so would require disregard of some local provision of the state which would otherwise be the state of the applicable law. (Emphasis add ed). In stating its rationale for this expansive principle, the Restatement notes that the prime objectives of contract law are to protect the justified expectations of the parties and provide a measure of certainty as to their rights and liabilities, and it concludes that [t]hese objectives may best be attained in multistate transactions by letting the parties choose th e law to go vern the va lidity of the contra ct and the rig hts created th ereby. This power o f choice, the authors co ntinue, is also consistent w ith the fact tha t, in contrast to other areas o f the law, p ersons are f ree within b road limits to d etermine the nature of th eir contractual obligations. The Restatement acknow ledges that S ection 187 (2) may perm it -11- the parties to escape prohibitions prevailing in the state which would otherwise be the state of the ap plicable law , but respon ds that the d emands of certainty, pred ictability and conv enience d ictate that, subjec t to some lim itations, the partie s should h ave pow er to choose the applicable law. Unquestionably, the broad principle stated in § 187(2) is applicable. The issue thus com es down to whethe r either of the two exce ptions to it app ly, and our answ er is no. As to the first, there can be little doubt that South Dakota has a substantial relationship to the parties an d the transac tion. It is the hom e State of C itibank, and it is the State w hence C itibank cred it cards are issu ed, including the card tha t was issued to Jackson. The transaction at issue is the credit card agreement, not the myriad of purchase s made b y Jackson, an d, as the hom e State of th e credit card is suer, surely Sou th Dakota has a substantial interest in assuring that the form and substance of the agreement that govern s the rights an d liabilities of the corporation it chartered are consistent w ith its law. The real question , then, is whe ther applicatio n of Sou th Dako ta law wo uld contravene a fundamental policy of the State of Maryland, and the answer to that turns on whether the requirement in CL § 12-503(e) that either a credit card agreement be signed by the buyer or that the issuer mak e an attempt to obtain the bu yer s signature constitutes such a fundamental policy of the State. In National Glass v. J.C. Penney, supra, 336 Md. 606, 613, n.4, 650 A.2d 246, 250, n.4, we observed that the fundamental policy exception in § 187(2) of the -12- Restatement is analogous to the lex loci contractus principle that re quires a stron g public policy to override application of the law of the place whe re the contract was m ade. It follows, then, that our lex loci contractus jurispruden ce is relevan t and inform ative in examining the fundamental policy exception in § 187(2). That is important, because most of the cases in which this issue has surfaced have been lex loci contractus cases, in which there has been no choice of law provision. The early articulation of the rule was that courts would always look to the lex loci, to give con struction to an instrumen t, and will imp art to it validity, accord ing to those law s, unless it wo uld be dan gerous, ag ainst public p olicy, or of imm oral tenden cy to enforce it here. See Trasher v. Everhart, 3 G.& J. 2 34, 244 (1 831); Union Trust Co. v. Knabe, 122 M d. 584, 608 , 89 A. 110 6, 1115 (1 914); Traylor v. Grafton, 273 Md. 649, 660, 332 A.2d 651, 659 (1975). In Bethlehem Steel v. G.C. Zarnas & Co., 304 Md. 183, 189, 498 A.2d 60 5, 608 (19 85), we o bserved th at merely bec ause M aryland law is dissimilar to the law of an other jurisdictio n does no t render the la tter contrary to Maryland public policy, and that, to be unenforceable under the public policy exception, there must be a strong public policy against its enforcement in Maryland, quoting from Texaco v. Vanden Bosche, 242 Md. 334 , 340-41, 219 A .2d 80, 83 (1966). In Bethlehem Steel, we had before us a Pennsylvania indemnity contract that called for the indemnitor to indem nify the indemnitee for liability arising from the indem nitee s sole negligence. Such a provision was lawful in Pennsylvania, but not in Maryland, and -13- the question arose whether it was enforceable in a Maryland court. In holding that it was not, we took note that the General Assembly had addressed the specific issue and, by statute, declared that such provisions were void and unenforceable. We observed also that Penns ylvania seem ed to have no strong p ublic policy to the contrary but m erely tolerated suc h a provisio n. On ba lance, we found th e Maryland public polic y sufficiently strong in comparison to that of Pennsylvania to justify overriding application of lex loci contractus. A similar situation, with like result, was presented in National Glass v. J.C. Penney, supra, 336 M d. 606, 650 A.2d 24 6. In the fac e of a M aryland statute ab solutely prohibiting an executory contract from requiring a subcontractor to waive its right to a mechanic s lien and declaring any provision to that effect void, we refused to enforce such a w aiver, notw ithstanding a choice of law clause purporting to apply Penn sylvania law, which allow ed the waiver. In Kramer v. Bally s Park Place, 311 Md. 387, 535 A.2d 466 (1988), applying the same principles, we reached a different result. At issue there was whether a gambling debt contracted in Ne w Jersey, where it was law ful, was enforceab le in Maryland, where gambling debts had long been held to be unenforceable. In holding that the New Jersey debt wo uld be enf orced here , the Court c onsidered the fact that th e earlier pub lic abhorrence of gambling had softened considerably, noting not only the allowance of public gambling activities by various charitable and religious organizations under license from a county but the fact that the State itself was heavily into that business through the -14- State lottery. Altho ugh priva te unlicense d gamblin g remaine d unlaw ful and ac tions to recover illegal gambling debts were not allowed in Maryland, the local public policy was not sufficiently strong to justify overriding lex loci contractus. Evolving public policy was at play as well in Kronovet v. Lipchin, supra, 288 Md. 30, 415 A.2d 1096, which did involve a choice of law provision. The contract at issue was a no te signed by M aryland residen ts, secured b y a deed of tru st on prope rty in Maryland. The agreement was negotiated and made in New York but called for Maryland law to apply with respect to the interest on the note. The rate of interest exceeded the then-lawful rate allowed in New York but was permissible in Maryland. In upholding the contractual choice of Maryland law, the Court looked to the fact that there was a substantial Maryland connection to the transaction but, in considering the public policy exception in Restatement, § 187(2) n oted that, sub sequent to th e making of the con tract, the New York law was amended to remove the ceiling on interest with respect to that kind of loan, ind icating that the policy in effec t when the loan was made w as not a fundamental one. Id. at 47, 415 A .2d at . A similar kind of analysis demonstrates that the requirement of CL § 12-503(e) does not represent a fundamental public policy sufficient to forsake the parties choice of South Dakota law. That analysis must take account of the historical development of bank-issued credit cards. Until the early 1960s, consumer credit was predominantly in the form or either -15- direct bank or finance compan y loans or paym ent plans of fered by ma jor retailers to customers seeking to buy goods on credit. Although travel and entertainment cards, such as Diner s C lub, Carte B lanche, and America n Expres s, were av ailable, they we re more in the nature of charge cards rather than credit cards, as the balance on those cards was due in f ull at the e nd of th e mon th. The adv ent of ban k-issued cre dit cards, such as Visa an d Maste rCard, beg an in earnest in the 1960s, but they did not become generally available until the late 1970s. The Supreme Court s decision in Marq uette N at l. Ban k v. Firs t of Om aha C orp., 439 U.S. 299, 99 S. Ct. 540, 58 L. Ed.2d 534 (1 978), which freed national bank credit card operations from the polyglot of State usury regulations, is often regarded as a major impetus for the spread of those cards, for it made the extension of credit on them much more pro fitable. Follow ing that dec ision, nationa l banks be gan to crea te subsidiaries in States such as South Dakota and Delaware, which had very liberal usury and credit laws, and offe r credit cards n ationally that carried the rates of in terest that we re allowed in those h ome S tates. See The Myth of the Rational Borrower, 84 Tex. L. Rev. 14 81 (2006); Seduction by Plastic, 98 Nw . U. L. Rev . 1373 (20 04); Symposium: Hom o Economicus, Homo Myopicus, and the Law and Economics of Consumer Choice, 73 U. Chi. L. Rev. 63 (2006). The legislative responses in Maryland must be viewed in light of that developm ent. When R CAL was first en acted in 19 67 (1967 Md. La ws, ch. 38 9), it regulated o nly -16- transactions and agreements between buyers and sellers for the retail sale of goods and services, pursuant to which the seller established a time sale price. The law, which was part of a general overhaul of the Retail Installment Sales Act, provided for the establishment of a retail credit account by a seller for the buyer and anticipated an application form that had to contain certain information. The law did not apply to the extens ion of c redit by fin ancial in stitutions and m ade no referen ce to cre dit cards . In 1969, the Legislature enacted two laws dealing with credit cards that, in one respect relevant here, seem to be inconsistent. By 1969 Md. Laws, ch. 496, RCAL was broadened to include within the definition of retail credit account credit card financing by a financial institution, and, as part of that law, the predecessor to CL § 12-503(e) was enacted, requiring that the agreement be in writing and that a reasonable attempt be made to obtain the buyer s signature to that agreement. 1969 Md. Laws, ch. 252 added a provision to the Cons umer Pro tection Ac t intended to allocate the risk of loss of a credit card. As now codified in CL § 14-1305(a), it states: Except [for a replacement or renewal card] if a credit card or card of identification for credit is issued to a person without his prior request or application, the card is not considered accepted until he signifies acceptance in writing or uses it to obtain cred it. (Emphasis add ed). Section 14-1305(b) goes on to provide that, until an unrequested card is accepted, the issuer assumes the risk of its loss, theft, or unauthorized use. That statute assumes the -17- prospect of a credit card being accepted and used without a prior request or application, and thus without the holder s signature. Inferentially, it assumes that, once the card is accepted, the risk of loss is on the holder, and that suggests that an unrequested card may be valid ev en withou t the holder s s ignature on an applicatio n or agreem ent. In 1983, th e Legislatu re enacted a new se t of Credit G rantor Rev olving Cr edit Provisions, now codified as CL §§ 12-901 through 12-924. Section 12-902 perm its a credit granto r to offer an d extend c redit under a revolving c redit plan, w hich § 12- 901(l) defines in a manner that would include bank-issued credit cards.4 Shortly after en actment o f the 1983 law, the C ommissio ner of Co nsumer C redit requested an opinion of the Attorney General as to whether, among other things, the revolving credit plan established under the new law was required to be in writing and 4 CL § 12-901(l) defines a revolving credit plan as: a plan that contemplates the extension of credit under an account governed by an agreement between a credit grantor and a borrower under which: (1) The credit grantor permits the borrower and, if the agreement governing the plan permits, persons acting on behalf of or with authorization from the borrower to make purchases or obtain loans from time to time; (2) The am ounts of p urchases a nd loans a re charged to the borrow er s accou nt; (3) The borrower is required to pay the credit grantor the amounts of all purchases and loans charged to the borrower s account under the plan but has the privilege of paying amounts due from time to time as agreed; and (4) Interest or finance charges may be charged and collected by the credit grantor from time to time on the amou nts due under t he plan . -18- signed by the borrower. In 68 Op. Att y. Gen. 206 (1983), the Attorney General responded that, although a new account must be in writing, it need not be signed by the borrower if acceptance is otherwise evidenced. Id. at 207. He explained that, although the statute anticipates a written agreement, the statutory references to such an agreement would not appear to require the signature of the borrower as the only means of acceptance, and he went on to conclude: When it enacted S ubtitle 9, the G eneral As sembly appe ars to have inten ded to dere gulate the g ranting of o pen-end credit in part by sim plifying p reviou s statuto ry require ments. Conspicuously absent from Subtitle 9 is the current RCAL requirement that a seller have an agreement signed by the buyer or have made a reasonable attempt to obtain the signature of the buyer. Cf. CL § 12-503(e). By omiting such formalities for the establishment of a Subtitle 9 agreement, the General Assembly evidently intended that use of the account or other evid ence of a cceptance . . . could be su fficient to constitute a binding agreement under Subtitle 9. Finally, in 1989, the Legislature added, as part of the laws dealing with prohibited actions (Maryland Code, title 5, subtitle 4 of the Cts. & Jud. Proc. Article), a provision that a credit agreement is not enforceable by way of action or defense unless, among other things , it is in writing an d is signed b y the person ag ainst who m its enforc ement is sough t. See Cts. & Ju d. Proc. A rt. § 5-408(b ). Althoug h § 5-408 (a)(2) defin es credit agreement broadly as including an agreement by a financial institution to extend credit, § 5-408(c) limits the section to commercial transactions and expressly excludes from it credit ex tended by mean s of, or in conne ction w ith, a cred it or char ge card . -19- Consistent with the analysis undertaken in Kramer and Kronovet, we conclude that, in light of the full legislative approach to this issue, the requirement of CL § 5103(e) does not represent a fundamental public policy of the State of Maryland sufficient to override re cognition o f the parties c ontractual ag reement to have Fed eral and So uth Dakota law apply to their agreement. Accordingly, we shall affirm the judgment of the Circuit Co urt. JUDGMENT OF CIRCUIT COURT FOR BALTIMORE CITY AFFIRMED, WITH COSTS. Judge Eldr idge concurs in the jud gme nt on ly. -20-
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