BofA Case Tests If Negative Balance Fees Count as Interest

By Chris Bruce

A federal judge has positioned Bank of America to appeal a ruling allowing lawsuits based on fees for deposit accounts that remain overdrawn ( Farrell v. Bank of Am. N.A. , S.D. Cal., 16-cv-00492, 4/11/17 ).

The case centers on an important but still-emerging question – whether so-called extended overdrawn balance charges, also known as sustained negative balance fees, are “interest” under the National Bank Act.

A would-be class lawsuit by Joanne Farrell says Bank of America violated the law by levying a $35 fee against deposit account holders who failed to cure overdrawn accounts within five days. That fee was in addition to the $35 fee the bank charges for individual overdrafts.

Until late last year, only a handful of federal courts had addressed the question, all of which rejected similar challenges on motions to dismiss. That changed in December, when Judge M. James Lorenz of the U.S. District Court for the Southern District of California denied Bank of America’s motion to dismiss Farrell’s claim, holding the fees are “interest” under Section 85 of the National Bank Act.

Case Stayed

The case is ongoing but has been stayed. In January, Bank of America asked Lorenz to certify the question for a mid-case appeal to the U.S. Court of Appeals for the Ninth Circuit. Lorenz granted the motion April 11 and stayed the case. The April 11 order certifies the “interest” question as a significant matter that may need additional attention at this point, but the decision whether to give it that attention is up to the Ninth Circuit.

Any such appeal is permissive, meaning the Ninth Circuit doesn’t have to accept it. It’s not clear when the appeals court might take action on the petition.

Bank of America is represented by Brian D. Boyle, Danielle N. Oakley, Jonathan Hacker, and Matthew W. Close of O’Melveny & Meyers in Washington, Los Angeles, and Newport Beach.

Farrell is represented by Jeffrey M. Ostrow and Robert C. Gilbert of Kopelwitz Ostrow Ferguson Weiselburg in Fort Lauderdale and Coral Gables, John R. Hargrove and John J. Unstal of Kelley Uustal in Fort Lauderdale, and Walter W. Noss of ScottScott in San Diego.

To contact the reporter on this story: Chris Bruce in Washington at

To contact the editor responsible for this story: Michael Ferullo at

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