N.D. Cal. Holds Debit Cards Are "Services" For Purposes Of The CRLA

Class Action Debit Cards Overdraft

On October 25, the United States District Court for the Northern District of California partially denied a bank’s motion for judgment on the pleadings seeking to dispose of class claims under California’s Unfair Competition Law (UCL) based on allegations that the bank reordered debit card transactions in order to maximize overdraft fees collected in connection with such transactions and misled customers regarding this practice in account agreements and monthly checking account statements. Hawthorne v. Umpqua Bank, No. 11-06700, 2013 WL 5781608 (N.D. Cal. Oct. 25, 2013). Departing from the conclusion reached by two other district courts, the court held that the bank’s debit cards constituted a “service” for purposes of the Consumer Legal Remedies Act (CRLA), which prohibits unfair methods of competition and unfair or deceptive acts and practices so long as the challenged conduct is part of a transaction involving the intended sale or lease of goods or services to a consumer. Two prior district courts had concluded that overdrafts and overdraft fees were not services sold or leased under the CLRA, but the Hawthorne court reached the opposite conclusion relying on the fact that (i) the CLRA is liberally construed and generally applicable to financial institutions and (ii) its determination that classifying debt cards as a service for consumers was consistent with the convenience benefits consumers receive from such cards. The court granted the bank’s motion for judgment on the pleadings with respect to a number of plaintiffs’ other claims, including violation of the unfair prong of the UCL, breach of the implied covenant good faith and fair dealing, breach of contract, and unjust enrichment.