Oklahoma Federal Court Holds Extended Overdraft Fees Are Not Interest Under the National Bank Act

The United States District Court for the Northern District of Oklahoma recently held that a bank’s extended overdraft fee was not illegal interest under the National Bank Act.  See Shaw v. BOKF, Nat. Ass’n, 2015 WL 6142903 (N.D. Okla. Oct. 19, 2015).  In the case, the plaintiff overdrew her bank account, and it remained overdrawn for 19 days.  In addition to the initial overdraft fees, the bank charged her an extended overdraft fee of $6.50 per day after five days.  The plaintiff filed a putative class action, alleging that the extended overdraft fees were effectively interest on an extension of credit made by the bank because the bank was charging her for each day she had “borrowed” the money, and the rate at which it charged her was excessive and in violation of the NBA.  The bank filed a motion to dismiss.  In opposition, the plaintiff cited the Code of Federal Regulations (“CFR”), which includes “creditor imposed not sufficient funds (NSF) fees charged when a borrower tenders payment on a debt with a check drawn on insufficient funds” in its definition of “interest.”  The court, however, noted that the CFR did not expressly include overdraft fees on a deposit account as interest.  More importantly, it cited a recent decision from Florida that addressed an identical situation and held that the “charges at issue are flat fees contingent upon a customer’s failure to remedy an overdrawn account, rather than payment for the use of money, and are not ‘interest’ within the ordinary meaning of the word.”  McGee v. Bank of Am., N.A., 2015 WL 4594582 (S.D. Fla. July 30, 2015).  Therefore, the court granted the bank’s motion to dismiss.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.