Summary
The Ninth Circuit affirmed dismissal of Andrew King’s California Unfair Competition Law claim against Navy Federal Credit Union. The court held that 12 C.F.R. § 701.35(c) expressly preempts state laws regulating account fees charged by federal credit unions, including generally applicable consumer-protection laws.
Topics
Practice areas
Questions Presented
- Whether 12 C.F.R. § 701.35(c) expressly preempts California's Unfair Competition Law claims challenging a federal credit union's assessment of an account fee.
- Whether the preemption clause applies when the challenged fee is allegedly inconsistent with federal law.
- Whether a generally applicable state consumer-protection statute such as California's Unfair Competition Law falls outside the regulation's preemptive scope because it does not expressly target federal credit unions.
- Whether the court should consider the argument that § 701.35(c) was invalidly promulgated when that argument was raised for the first time on appeal.
Holdings
- Section 701.35(c) expressly preempts state laws regulating the account fees charged by federal credit unions, including generally applicable state laws such as California's Unfair Competition Law.
- Whether a particular fee complies with federal law does not determine whether state-law challenges to that fee are preempted; the regulation's federal-law-compliance clause and its state-law preemption clause operate independently.
- The NCUA's belated and informal interpretation was not entitled to deference because it conflicted with the regulation's text and prior agency statements and lacked a thorough explanation.
- The court declined to consider the invalid-promulgation argument because King waived it by failing to raise it in the district court.
Key quotations
“State laws regulating such activities are not applicable to federal credit unions.” (7-8)
“all state laws that regulate account fees—general, specific, or otherwise— have no application to federal credit unions.” (13)
Factual background
In July 2022, Andrew King attempted to deposit a large check into his Navy Federal Credit Union account, but the transaction failed through no fault of his own. Navy Federal assessed King a $15 returned-check fee under its bounced-check policy. After unsuccessful efforts to resolve the dispute, King sued, challenging the fee under California's Unfair Competition Law.
Procedural history
King sued Navy Federal Credit Union in California state court, alleging that a $15 returned-check fee constituted an unfair and unlawful business practice under California's Unfair Competition Law and violated the federal Consumer Financial Protection Act. Navy Federal removed the action to federal court. The district court held that the state-law claims concerning the federal credit union's fee practices were expressly preempted by 12 C.F.R. § 701.35(c) and dismissed the case. The Ninth Circuit affirmed.