In re: TD Bank, N.A. Debit Card Overdraft Fee Litigation
6:15-mn-02613
D.S.C.Feb 28, 2018Background
- MDL 2613 consolidated multiple putative class actions challenging TD Bank’s overdraft practices, including a usury claim that sustained overdraft fees constitute “interest.”
- The Consolidated Amended Complaint (CAC) included a usury Count (Count VIII) alleging TD’s $20 “sustained overdraft fee” (assessed after an account is overdrawn for 10 business days) is interest in violation of 12 U.S.C. §§ 85–86.
- The court previously dismissed the materially identical usury claim in the CAC, holding sustained overdraft fees are not “interest” for purposes of the National Bank Act; that dismissal was with prejudice as to Count VIII.
- Dorsey’s transferred complaint reasserted the same usury theory; TD moved to dismiss under Rule 12(b)(6).
- The court applied the law-of-the-case doctrine to bar reconsideration of its earlier ruling and, on the merits, concluded sustained overdraft fees are non-interest deposit-account service charges under OCC regulations and controlling precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a $20 sustained overdraft fee is “interest” under 12 U.S.C. § 85 | Dorsey: sustained fee is effectively interest on an extension of credit (a late charge/ time-value charge) and thus subject to usury limits | TD: the fee is a deposit-account service charge under the PDAA and OCC regs (12 C.F.R. § 7.4002), not interest under § 7.4001 | Court: Dismissed — fee is not “interest”; complaint fails under Rule 12(b)(6) |
| Whether prior dismissal controls Dorsey (law-of-the-case) | Dorsey: asks court to revisit the issue based on regulatory commentary and other authorities | TD: prior ruling dismissing identical claim controls; MDL consistency requires same result | Court: Applied law-of-the-case; prior ruling stands; no extraordinary reason to depart |
| Whether regulatory materials/regulations (Reg O, Joint Guidance) compel treating overdrafts as credit for § 85 purposes | Dorsey: various regs/guidance treat overdrafts as extensions of credit, so sustained fees are interest | TD: OCC regulations and interpretations treat overdraft fees as deposit-account non-interest charges; those authorities govern § 85 analysis | Court: Regulatory references (including OCC interpretive positions) support TD; Reg O and Joint Guidance inapposite to § 85 analysis |
| Whether dismissal is premature because factual development is needed | Dorsey: characterization of overdrafts as extensions of credit raises factual issues requiring discovery | TD: legal characterization is appropriate on the pleadings; multiple courts resolved same issue on motions to dismiss | Court: No discovery needed; legal issue resolved on the pleadings; dismissal proper |
Key Cases Cited
- Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735 (late fees on credit accounts considered interest under federal deference to OCC)
- Video Trax, Inc. v. NationsBank, N.A., 33 F. Supp. 2d 1041 (S.D. Fla. 1998) (overdraft fees arising from deposit agreement are non-interest charges)
- McGee v. Bank of Am., N.A., [citation="674 F. App'x 958"] (11th Cir. 2017) (extended overdrawn balance charges are not interest under §§ 85–86)
- Farrell v. Bank of Am., N.A., 224 F. Supp. 3d 1016 (S.D. Cal. 2016) (district court held an extended overdraft charge could be alleged as interest; court here found it unpersuasive)
- Pinney v. Nokia, Inc., 402 F.3d 430 (4th Cir. 2005) (MDL transferee court authority to ensure consistent treatment of consolidated cases)
- TFWS, Inc. v. Franchot, 572 F.3d 186 (4th Cir. 2009) (law-of-the-case doctrine and high threshold to revisit prior rulings)
- Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (law-of-the-case principles)
- United States v. Aramony, 166 F.3d 655 (4th Cir. 1999) (standards for departing from law-of-the-case)