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Walker v. BOKF, National Association.

No. 20-2046. D.N.M. Judge Briscoe. Bank Extended Overdraft Charges—Interest versus Deposit Account Services—National Bank Act of 1864—Office of the Comptroller of the Currency Regulations—Deference.

April 8, 2022

Plaintiff held a checking account with defendant bank BOKF, National Association (BOKF), and he overdrew the account by about $25. Under the BOKF depository agreement, the bank could either refuse to pay the item and charge a returned item fee, or it could pay the item and charge overdraft fees. BOKF elected to pay the item and charged plaintiff an overdraft fee of $34.30. When plaintiff failed to timely pay BOKF for covering the overdraft, BOKF imposed an extended overdraft fee of $6.50 per business day following the five-business-day grace period under the depository agreement. When plaintiff repaid the overdraw about two months later, the total fee was $234.

Plaintiff filed this putative class action alleging that the extended overdraft fees constituted interest upon an extension of credit and exceeded the interest rate limit set by the National Bank Act of 1864 (NBA). BOKF moved to dismiss under Fed. R. Civ. Proc. 12(b)(6). The district court granted the motion, concluding that the extended overdraft fees were not interest under the NBA as a matter of law, and entered final judgment. Plaintiff filed a motion for reconsideration, which was denied.

On appeal, plaintiff argued that the district erred in granting BOKF’s motion to dismiss because (1) when BOKF pays an overdraft on a customer’s deposit account, it makes a “loan” within the meaning of the NBA; and (2) BOKF’s extended overdraft fees are “interest” the customer must pay on that “loan,” as unambiguously defined in 12 CFR § 7.4001(a). The NBA provides a private cause of action to parties who have been charged interest beyond the usury limits and permits recovery of twice the amount of interest paid. While the NBA limits the amount of interest that national banks may lawfully charge to the rate allowed by the laws of the state where the bank is located, it does not define “interest.” However, the Office of the Comptroller of the Currency (OCC), which is the agency responsible for administering NBA, issued two regulations to clarify what charges qualify as interest under the NBA. Under 12 CFR § 7.4001, “interest” means “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.” And 12 CFR § 7.4002 states that banks may impose “non-interest charges and fees, including deposit account service charges.” The NBA’s anti-usury provisions do not limit non-interest charges and fees governed by § 7.4002. Additionally, the OCC issued Interpretive Letter 1082, in which it determined a bank’s practice of collecting overdraft fees was lawful under the NBA and other banking regulations. The letter opined that overdraft fees are meant to compensate banks for “services directly connected with the maintenance of a deposit account” and that the ability to charge the fees was reaffirmed in § 7.4002(a).

The Tenth Circuit first concluded that §§ 7.4001(a) and 7.4002 are ambiguous regarding how extended overdraft fees should be categorized. It therefore analyzed whether deference to OCC’s Interpretive Letter 1082 was appropriate, concluding that Interpretive Letter 1082 represents OCC’s reasonable interpretation of genuinely ambiguous regulations, and OCC’s determination that fees like BOKF’s extended overdraft fees are “non-interest charges” is neither plainly erroneous nor inconsistent with the regulations it interprets. Accordingly, as non-interest charges under § 7.4002, BOKF’s extended overdraft fees are not subject to the NBA’s usury limits, and plaintiff failed to state a claim. Accordingly, the district court did not err. Further, the district court did not abuse its discretion in denying plaintiff’s motion for reconsideration.

The order of dismissal was affirmed.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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