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Financial Services Law Insights and Observations

Judge says overdraft fees are not usurious, removes claim from lawsuit

Courts Usury Overdraft National Bank Act Class Action

Courts

On February 28, the U.S. District Court for the District of South Carolina dismissed a complaint from a consolidated class action against a national bank, which alleged that the bank’s $20 overdraft fee is an interest charge on credit and therefore exceeds usury limits under the National Bank Act (NBA). The plaintiffs in the consolidated class action challenged the bank’s methods for assessing overdraft fees, posting debit transactions, and assessing “sustained” overdraft fees, claiming they violated federal law. In granting the dismissal, the court noted that it had previously rejected a materially identical usury claim in December 2015 and that no new evidence or authority had been brought to light that would change its decision. In addition, the court concluded that “the law is still clear that sustained overdraft fees are not interest, and that assessing such fees cannot violate the usury provision of the NBA.” 

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