In re HSBC Bank, USA, N.A., Debit Card Overdraft Fee Litigation
1 F. Supp. 3d 34
| E.D.N.Y | 2014Background
- HSBC provides debit/ATM cards and can honor overdrafts, charging a $35 fee per overdraft.
- Plaintiffs allege HSBC posts debits in high-to-low order to maximize overdraft fees and does not clearly disclose posting order or opt-out rights.
- Alleged posting manipulation occurs across multiple accounts, potentially causing multiple overdraft fees that would not occur with chronological or smallest-to-largest posting.
- Before July 1, 2010 HSBC auto-enrolled customers in overdraft protection without opt-out opportunities.
- Amended consolidated class action asserts contract, implied covenant, conversion, and unjust enrichment claims across 13 state subclasses, plus New York and California statutory claims.
- Court dismissed some defendants/entities and consolidated actions; proceeding on certain NY/CA claims while preempted or untimely aspects were resolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preemption scope of NBA/OCC regulations | Plaintiffs argue state claims are not preempted and may regulate banking practices. | HSBC contends NBA/OCC preempt state laws and disclosure/fee practices. | Not preempted; state claims not precluded by NBA/OCC in this context. |
| Effect of posting order disclosure and practice claims on preemption | Claims about disclosure and posting practices are not blanket prohibitions on posting, but challenge alleged unlawful manipulation. | Courts should treat posting-order decisions as pricing decisions potentially preempted. | Plaintiffs' disclosure-related claims are not fully preempted; some aspects may be preempted, but others survive. |
| Standing to pursue state-law claims beyond New York and California | Named plaintiffs can pursue multi-state claims on behalf of a nationwide class. | Standing requires named plaintiffs with state-specific injuries or connections to each state. | State-law claims outside NY/CA lack standing for named plaintiffs; those claims are dismissed without prejudice. |
| New York/California common-law claims viability | Implied covenant, breach of contract, and unjust enrichment should survive given alleged bad faith posting. | Breach of contract and unjust enrichment fail where no identifiable contract term breached; conversion barred by law; some claims time-barred. | Implied covenant claim survives; breach of contract and unjust enrichment claims dismissed; New York conversion and related claims are time-barred; CA CLRA claims dismissed; FAL/UCL claims survive related to unlawful/fraudulent conduct. |
Key Cases Cited
- Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007) (national banks are subject to a mixed state/federal regulatory regime)
- Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996) (federal preemption of state law; banks' powers are often governed by federal framework)
- First National Bank in St. Louis v. Missouri, 263 U.S. 640 (1924) (federal control does not preempt the entire field of banking; mixed regime)
- Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712 (9th Cir. 2012) (OCC interpretations may inform preemption; UCL claim analyzed for interference with banking powers)
- In re Checking Account Overdraft Litigation, 694 F. Supp. 2d 1302 (S.D. Fla. 2010) (claims not preempted when alleging unlawful posting practices; contract/tort claims can survive)