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Walker v. BOKF, N. A.

United States District Court, D. New Mexico

July 15, 2019

BERKLEY V. WALKER, on behalf of himself and all others similarly situated, Plaintiffs,
v.
BOKF, NATIONAL ASSOCIATION d/b/a BANK OF ALBUQUERQUE, N.A., Defendant.

          MEMORANDUM OPINION AND ORDER

          JUDITH C. HERRERA UNTIED STATES DISTRICT COURT JUDGE

         This case presents the question of whether the National Bank Act (“NBA”), 12 U.S.C. §§ 85-86, a federal law that regulates interest rates banks are able to charge, applies to extended overdraft fees banks charge to overdrawn accounts. On September 20, 2018, BOKF, National Association d/b/a Bank of Albuquerque, N.A. (“Defendant” or “BOKF”) filed a Motion to Dismiss (ECF No. 5) the claim against it. The Court, having reviewed the motion, briefs, relevant law, and otherwise being fully advised, finds that the motion should be granted.

         I. FACTUAL BACKGROUND

         Plaintiff Berkley V. Walker (“Plaintiff”) resides in Albuquerque and maintains a checking account at Defendant's Albuquerque branch. Compl. ¶ 7, at 3, ECF No. 1. The account is governed by BOKF's standardized account agreement, which states:

If Multiple items have been presented against the Account and your Available Balance is insufficient to pay all the items presented, we will charge a fee (Overdraft Fee or Returned Item Fee) with respect to each item paid or returned.
If your balance continues to remain overdrawn more than five business days, you will be subject to an Extended Overdraft Fee[1] in the amount set in the Summary of Fees.

Id. ¶ 10, at 4.[2] According to the Summary of Fees, if BOKF pays for an item that a depositor authorizes of an amount greater than the account balance, BOKF charges a $34.50 fee for the initial overdraft. Id. ¶ 12, at 4. If the account status remains overdrawn five business days after the initial overdraft fee, BOKF may charge an additional Extended Overdraft Fee of $6.50 per business day. Id. ¶ 13, at 5.

         On January 19, 2017, Plaintiff overdrew funds from his Bank of Albuquerque checking account. Id. ¶ 21, at 8. In accordance with the deposit account agreement and summary of fees, Defendant assesed an initial overdraft fee. Id. On January 26, the sixth business day after the initial overdraft, Defendant assesed an extended overdraft fee. Id. ¶ 22, at 8. Defendant continued to asses extended overdraft fees each business day until the account balance was no longer negative on March 17, 2017. Id. This created thirty-six separate extended overdraft fee charges, worth $234 dollars, extending Plaintiff's negative account balance from $59.81 to $293.81. Id. ¶ 23, at 8.

         BOKF is subject to the NBA and regulations promulgated by the Office of the Comptroller of the Currency (“OCC”), the primary regulator of national banks. Id. ¶ 8, at 3. The NBA prevents national banks from assessing usurious interest rates on any extension of credit. See 12 U.S.C. §§ 85-86.

         II. PROCEDURAL BACKGROUND

         On August 22, 2018, Plaintiff filed a putative class action on behalf of himself and others similarly situated. Plaintiff asserted only one claim, alleging that the extended overdraft fees in BOKF's standardized deposit account agreement are interest and that the interest rate violates the NBA. Plaintiff contends that Defendant is effectively charging an annulaized interest rate of between 501% and 2, 464%, or 83 times what Defendant may legally charge under the NBA. Compl. ¶¶ 43, 44 at 13.

         On September 20, 2018, Defendant filed the Motion to Dismiss, arguing extended overdraft fees are not interest under the NBA. In support, Defendant asserts that there is a long history of case law where courts held that both initial and extended overdraft fees are not interest under the NBA, although there is no Tenth Circuit Court of Appeals decision that directly resolves this issue. See Def.'s Br. Supp. Mot. Dismiss, ECF No. 6, at 2. Defendant further asserts OCC's interpretation of overdraft fees places extended overdraft fees as an element of deposit account services rather than interest. See OCC Interpretive Letter No. 1082, 2007 WL 5393636 (May 17, 2007) (“the Letter”).

         In response, Plaintiff urges the Court to adopt the reasoning outlined in Farrell v. Bank of Am. N.A., 224 F.Supp.3d 1016 (S.D. Cal. Dec. 19, 2016), which is the only court to find that extended overdraft fees are interest rates under the NBA. First, Plaintiff argues that initial overdraft fees and extended overdraft fees are entirely separate and triggered at different times and for different reasons. Pl.'s Resp., ECF No. 15, at 8. Although initial overdraft fees are deposit account services, extended overdraft fees cannot be considered connected to the same banking services banks provide to their depositors. Id. In reality, Plaintff says, extended overdraft fees are for failure to pay back the initial overdraft fee placed upon the account. Id. Second, Plaintiff argues that when a bank covers an overdrawn account, they are “loaning” money to the account depositor. Id. at 14 (citing Joint Guidance on Overdraft Protection Programs, 70 FR 97127-01, 2005 WL 420970 (Feb. 24, 2005)). As such, the extended overdraft fee is really the interest on this “loan” by the bank. Id. Therefore, Plaintiff contends that extended overdraft fees should be subjected to the usurious interest rate regulations of the NBA. Id. at 19.

         III. ...


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