Georgia Carves Overdraft, Other Fees Out Of Usury Limit Applicable To State Banks

Overdraft Usury

On April 15, Georgia Governor Nathan Deal signed HB 824, which amends state law to clarify that certain banking fees are not “interest” subject to the state’s usury cap applicable to state-chartered institutions. Specifically, the bill carves out from the definition of “interest” the following: overdraft and nonsufficient funds, delinquency or default charges, returned payment charges, stop payment charges, or automated teller machine charges, and any other charge agreed upon in a written agreement governing a deposit, share, or other account. The legislation was crafted to codify and expand a declaratory order issued by the state banking commissioner following a March 2013 Georgia Court of Appeals holding that Georgia law in some situations could allow overdraft fees to be considered interest. Plaintiffs in the case had sued a state bank claiming that its overdraft fees amounted to an interest rate that far exceeded the state’s usury cap. The changes made by HB 824 took effect immediately.