BARBARA FAWCETT, individually and on behalf of all others similarly situated, Plaintiff, Appellant,
CITIZENS BANK, N.A., Defendant, Appellee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. Timothy S. Hillman, U.S. District Judge]
F. Haber, with whom Patrick J. Vallely and Shapiro Haber
& Urmy LLP were on brief, for appellant.
J. Zimmer, with whom Brenda R. Sharton and Goodwin Procter
LLP were on brief, for appellee.
Howard, Chief Judge, Lynch and Lipez, Circuit Judges.
putative class action alleges that Citizens Bank's
"Sustained Overdraft Fees" for overdrawn checking
accounts are usurious interest charges in violation of
Section 85 of the National Bank Act, 12 U.S.C. § 1
et seq. The district court concluded that Citizens
Bank's fees were not "interest" under the Act
and so dismissed the action for failure to state a claim.
Order, Fawcett v. Citizens Bank, N.A., No.
4:17-cv-11043-TSH (D. Mass. Apr. 19, 2018), ECF No. 36.
facts of this case, we hold that Citizens Bank's
"Sustained Overdraft Fees" are not
"interest" under the National Bank Act. This result
follows from regulatory text and history and from persuasive,
directly applicable reasoning presented in the Office of the
Comptroller of the Currency's Interpretive Letter 1082,
issued in 2007. We affirm.
National Bank Act (NBA) governs the business activities of
national banks like Citizens Bank. The Office of the
Comptroller of the Currency (OCC), the agency Congress has
charged with implementing the NBA, oversees national
banks' operations and interactions with customers.
Watters v. Wachovia Bank, N.A., 550 U.S. 1, 6
allows a national bank to charge "interest at the rate
allowed by the laws of the State . . . where the bank is
located." 12 U.S.C. § 85. The NBA does not define
the term "interest." The Supreme Court has held
that the term "interest" is ambiguous and that OCC
is due deference in interpreting it. Smiley v. Citibank
(S.D.), N.A., 517 U.S. 735, 739 (1996) (citing
Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc.,
467 U.S. 837, 842-45 (1984)).
has, in regulations promulgated after notice and comment,
defined the term "interest" as used in Section 85
of the NBA:
The term 'interest' as used in 12 U.S.C. [§] 85
includes any payment compensating a creditor or prospective
creditor for an extension of credit, making available of a
line of credit, or any default or breach by a borrower of a
condition upon which credit was extended.
It includes, among other things, the following fees connected
with credit extension or availability:
• numerical periodic rates,
• late fees,
• creditor-imposed not sufficient funds (NSF) fees
charged when a borrower tenders payment on a debt with a
check drawn on insufficient funds,
• overlimit fees,
• annual fees,
• cash advance fees, and .
• membership fees.
It does not ordinarily include appraisal fees, premiums and
commissions attributable to insurance guaranteeing repayment
of any extension of credit, finders' fees, fees for
document preparation or notarization, or fees incurred to
obtain credit reports.
12 C.F.R. § 7.4001(a) (bullet points and line breaks
added). When a charge is "interest," its
rate cannot exceed "the maximum rate permitted to any
state-chartered or licensed lending institution by the law of
[the state where the bank is located]." Id.
§ 7.4001(b). This maximum interest rate is called a
"usury limit." See, e.g., M. Nahas
& Co., Inc. v. First Nat. Bank of Hot Springs, 930
F.2d 608, 610 (8th Cir. 1991) (using the term).
bank's charge is not "interest," however, then
the guidelines for "deposit account service
charges" apply. 12 C.F.R. § 7.4002. Deposit account
service charges are not subject to usury limits. See
id. A bank may, at its discretion, impose a deposit
account service charge and set its amount, so long as the
bank acts within the bounds of "sound banking judgment
and safe and sound banking principles." Id.
the parties draw different conclusions from regulatory
history, we recount that history here. In 2001, OCC revisited
its definition of "interest." OCC said that fees
like "overdraft and returned check charges" imposed
by a bank on its checking account customers were
"deposit account services" charges and not
"interest." 66 Fed. Reg. 8178, 8180 (Jan. 30,
2001). OCC then noted a gap in its regulations: If a
bank's overdraft fee exceeded its returned check fee,
then the difference between those two charges -- its excess
overdraft charge -- "could be viewed as interest within
the meaning of [the NBA]." Id. OCC stated that
its regulation "did not expressly resolve this
issue" and invited comment. Id.
published its final rule, set forth above, after the comment
period closed. OCC noted that it had "received numerous
comments" on whether "any portion of the fee
imposed by a national bank when it pays an overdraft"
should constitute "interest" under the NBA. 66 Fed.
Reg. 34784, 34787 (July 2, 2001). Given the "complex and
fact-specific concerns" that including "any portion
of a charge imposed in connection with paying an
overdraft" in the definition of "interest"
would raise, OCC ...