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Extended Overdraft Fees Not Interest for Purposes of State Limits on Consumer Loan Interest Rates

The United States Court of Appeals for the 10th Circuit has held, in a case of first impression, Walker v. BOKF NA., that extended overdraft fees that accrue each business day are “non-interest charges” and, therefore, do not violate state limits on interest rates for consumer loans.

Plaintiff Berkley Walker filed a proposed class action suit against the bank in the United States District Court for the District of New Mexico. Walker alleged that the bank charged him $234 in extended overdraft fees over several weeks after he withdrew $25 from his account. Walker alleged that the fees violated the National Bank Act’s provisions, as the fees would constitute an interest rate eighty-three times the amount allowed in the Bank’s home state of Oklahoma.  The District Court dismissed the case, and Walker appealed.

The 10th Circuit agreed with the District Court, relying on an interpretive letter from the Office of the Comptroller of the Currency characterizing overdraft fees as “non-interest charges” under the National Bank Act. The majority found that the regulations interpreted by the letter were ambiguous, as they did not say whether or not overdraft fees were interest. The regulations “not only fail to mention extended overdraft fees, but they also follow no discernable pattern and arguably confuse the issue.” Accordingly, the OCC’s interpretation was owed deference from the Court, and the overdraft fees did not violate the National Bank Act.

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