919 F.3d 133
1st Cir.2019Background
- Plaintiff Barbara Fawcett sued Citizens Bank, a national bank, alleging its "Sustained Overdraft Fees" (three $30 charges over 10 days after an initial $35 overdraft fee) are usurious "interest" under 12 U.S.C. § 85.
- Citizens Bank charges $35 for returned items and $35 for initial overdrafts; if the bank honors the item and the account stays negative it adds up to $90 in sustained fees.
- District court dismissed the putative class complaint under Rule 12(b)(6), holding sustained overdraft fees are not "interest." Fawcett appealed.
- OCC regulations distinguish "interest" (12 C.F.R. § 7.4001) from deposit account service charges (12 C.F.R. § 7.4002); interest is subject to state usury limits, service charges are not.
- The OCC issued Interpretive Letter 1082 (2007) stating that flat excess/continuous overdraft charges (e.g., per-business-day charges after several days overdrawn) are deposit account service charges, not interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Citizens Bank's sustained overdraft fees constitute "interest" under the National Bank Act | Fawcett: sustained fees are economically interest (a charge for continued use of bank funds) and may exceed state usury limits | Citizens: sustained fees are deposit account service charges under OCC regs and thus not subject to usury limits | Fees are deposit account service charges, not "interest" under the NBA; dismissal affirmed |
| Whether OCC Interpretive Letter 1082 is entitled to deference | Fawcett: the Letter does not squarely resolve sustained fees and OCC has been inconsistent; deference inappropriate | Citizens: Letter directly addresses continuous/flat overdraft charges; Auer deference applies | Auer deference applies; OCC's interpretation controls and is not plainly erroneous |
| Whether, absent Auer, the Letter merits persuasive weight | Fawcett: factual record could show economic reality of credit; discovery needed | Citizens: OCC's reasoning that flat fees arise from account terms, connect to deposit services, lack credit hallmarks, and don't operate as conventional interest is persuasive | Even absent Auer, OCC's reasoning is persuasive; fees lack hallmarks of credit/interest |
| Whether the case requires discovery on facts before ruling | Fawcett/Dissent: classification may be fact-specific; discovery needed | Citizens/Majority: OCC guidance resolves the legal question; no discovery required on the pure legal issue | No discovery required; question resolved as a matter of law based on OCC interpretation |
Key Cases Cited
- Smiley v. Citibank (S.D.), N.A., 517 U.S. 735 (Supreme Court) (defers to OCC interpretation of "interest" under NBA)
- Auer v. Robbins, 519 U.S. 452 (Supreme Court) (agency interpretation of its own regulation controls unless plainly erroneous)
- Chase Bank USA, N.A. v. McCoy, 562 U.S. 195 (Supreme Court) (deference to agency interpretation where consistent with regulatory text)
- Clarke v. Sec. Indus. Ass'n, 479 U.S. 388 (Supreme Court) (agency's interpretive authority is entitled to great weight)
- NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251 (Supreme Court) (deference to agency interpretations implementing statutory schemes)
- Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (Supreme Court) (Auer deference applied to less formal agency statements)
- Video Trax, Inc. v. NationsBank, N.A., 205 F.3d 1358 (11th Cir.) (viewing fees as account-service related is relevant to classification)
- Wells Fargo Bank of Tex., N.A. v. James, 321 F.3d 488 (5th Cir.) (court applied Auer deference to OCC interpretive letter)