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Highlight Updates Challenges to the Amount of the Fee or the Right to Charge It

A number of cases have considered various practices in connection with overdraft and nonsufficient funds (NSF) fees. Challenges to the amount of overdraft or NSF fees imposed by national banks have generally failed.191 Courts have held these claims to be preempted by the OCC regulation permitting national banks to set the price of fees at their discretion.192 These decisions usually do not include a close analysis of the OCC regulation’s limited scope.193

Arguably, a bank’s practice of debiting overdraft fees from depositors’ accounts could be viewed as an exercise of the “right to collect debts,” which is protected from preemption by the savings clause in the OCC deposit-taking regulation.194 In 2007, however, the OCC issued an opinion letter to the contrary.195 Whether the Dodd-Frank Act’s repudiation of the OCC’s practice of preemption-by-letter196 impacts this ruling has not yet been addressed by the courts.

Another issue is whether an overdraft fee is interest. The OCC’s preemption regulations apply only to banks’ non-interest fees, not to interest.197 If a charge is interest, then it is governed instead by section 85 of the National Bank Act, which allows national banks the choice of exporting their home state’s interest rate or abiding by a federal rate.198 A 2016 decision holds that an initial fee that a bank imposes whenever a depositor overdraws an account, whether or not the bank covers the overdraft, is not interest, but a charge that is imposed if the depositor does not remedy the account’s negative balance within five days is interest.199 The court reasoned that a transaction in which the bank covers an overdraft and then charges the depositor for doing so amounts to an extension of credit, and a charge that is imposed after five days is a charge for the use of money. The consumer would therefore have a usury claim if the amount of the charge exceeded that allowed by section 85.


  • 191 {181} See Gutierrez v. Wells Fargo Bank, 704 F.3d 712 (9th Cir. 2012); Montgomery v. Bank of Am. Corp., 515 F. Supp. 2d 1106 (C.D. Cal. 2007) (state UDAP claims regarding unconscionable amount of overdraft fees are preempted). See also Whittington v. Mobileoil Fed. Credit Union, 2017 WL 6988193 (E.D. Tex. Sept. 14, 2017) (claim that credit union imposed overdraft charges unfairly and unconscionably is preempted); In re Checking Account Overdraft Litig., 797 F. Supp. 2d 1312, 1322 (S.D. Fla. 2011) (stating in dicta that federal law would preempt claim that bank could not charge overdraft fees); Old Nat’l Bank v. Kelly, 31 N.E.3d 522, 529–531 (Ind. Ct. App. 2015) (contrasting an attack on the right to charge overdraft fees with a challenge to unlawful manipulation of an overdraft program, and finding the latter not preempted).

    Older cases, prior to issuance of the OCC’s preemption regulations, sustained state law challenges to the amount of overdraft fees. See Perdue v. Crocker Nat’l Bank, 702 P.2d 503 (Cal. 1985) (claim of unconscionable charge not preempted); Best v. U.S. Nat’l Bank of Or., 739 P.2d 554 (Or. 1987) (claim of violation of obligation of good faith not preempted).

  • 192 {182} 12 C.F.R. § 7.4002. See § 1.5.6, supra.

  • 193 {183} See § 1.5.6, supra.

  • 194 {184} 12 C.F.R. § 7.4007(c)(4). See § 1.5.5, supra. Courts have generally held that the identical clause in the OCC’s preemption regulation regarding lending preserves state restrictions on debt collection practices. See National Consumer Law Center, Mortgage Lending § (3d ed. 2019), updated at; National Consumer Law Center, Fair Debt Collection § 10.1.2 (9th ed. 2018), updated at

  • 195 {185} OCC Interpretive Letter No. 1082, 2007 WL 5393636 (May 17, 2007).

  • 196 {186} See § 1.5.4, supra.

  • 197 {187} 12 C.F.R. § 7.4002. See also 12 C.F.R. §§ 7.4001 (defining interest for purposes of National Bank Act § 85 and noting that a national bank can charge its home state’s interest rate), 7.4008 n.6 (stating that limitations on interest are determined by National Bank Act § 85).

  • 198 {188} See National Consumer Law Center, Consumer Credit Regulation § 3.4.1 (2d ed. 2015), updated at

  • 199 {189} Farrell v. Bank of Am., 224 F. Supp. 3d 1016 (S.D. Cal. 2016).