Opinion
Civil Action No. 4:04CV30LN.
July 22, 2004
MEMORANDUM OPINION AND ORDER
Plaintiffs filed this action in state court complaining of alleged predatory lending practices by defendants in connection with certain loan transactions to which plaintiffs were parties. Defendants removed the case to this court on the basis of federal question jurisdiction, contending that plaintiffs' complaint raises claims that are completely preempted by the National Bank Act, 12 U.S.C. § 85, 86. Plaintiffs promptly filed a motion to remand, to which defendants responded in opposition. Having considered the parties' argument and having reviewed the complaint, the court cannot conclude that federal jurisdiction is present, and accordingly, the court concludes that plaintiffs' motion to remand must be granted.
Section 85 of the National Bank Act states that a national bank may charge a rate of interest on a loan consistent with the maximum allowable rate as designated by the state in which the bank is located, and Section 86 of the Act allows recovery for "the taking, receiving, reserving, or charging a rate of interest greater than what is allowed under Section 85 of this Title." 12 U.S.C. § 86. In Beneficial National Bank v. Anderson, 539 U.S. 1, 123 S. Ct. 2058, 156 L. Ed. 2d 1 (2003), the Supreme Court held that state law claims brought against a national bank for usurious interest and fees are completely preempted by the National Bank Act, 12 U.S.C. §§ 85, 86. Thus, "[b]ecause §§ 85 and 86 provide the exclusive cause of action for such claims, there is, in short, no such thing as a state-law claim of usury against a national bank." Beneficial Nat'l Bank, 123 S. Ct. at 264. Accordingly, the determinative issue as to defendants' assertion of federal question jurisdiction is whether plaintiffs have asserted a claim for usury.
Defendant Central Financial Services, Inc. is a subsidiary of Great Southern National Bank and accordingly, is considered a national bank for present purposes. See 12 C.F.R. 5.34(e) (3) (providing that "[a]n operating subsidiary conducts activities authorized under this section pursuant to the same authorization, terms and conditions that apply to the conduct of such activities by its parent national bank").
While "usury" is generally defined as the "charging of an illegal rate of interest," Black's Law Dictionary, 1545 (6th ed. 1990), "interest" is not strictly limited to the "interest rate" on a loan, but includes the "[c]ost of using credit or funds of another," id. at 812. The Office of the Comptroller of Currency (OCC) has issued a regulation defining "interest" as it is used in § 85. According to the OCC, the term "interest" includes "any payment compensating a creditor or prospective creditor for an extension of credit[.]" 12 C.F.R. § 7.4001. The regulation provides a non-exhaustive list of fees which may be included under the term "interest," including, among other things, "numerical periodic rates, late fees, creditor-imposed not sufficient funds (NSF) fees charged when a borrower tenders payment on a debt with a check drawn on insufficient funds, overlimit fees, annual fees, cash advance fees, and membership fees." Id. See also Greenwood Trust Co. v. Mass., 971 F.2d 818, 829-30 (1st Cir. 1992) ("`interest' . . . encompass[es] a variety of lender-imposed fees and financial requirements which are independent of a numerical percentage rate.'").
Defendants maintain that even though plaintiffs have not specifically alleged a cause of action for "usury," and have instead purported to assert claims based solely on the alleged violation of state law and have further explicitly disavowed any intention to assert claims arising under federal law, it is nonetheless apparent from their complaint, despite plaintiffs' attempt at artful pleading, that a claim for usury is present in the complaint. In this vein, defendants point out that throughout their complaint in this cause, plaintiffs repeatedly allege that defendants charged "exorbitant" or "excessive" interest rates on amounts financed, that defendants "charged excessively high and/or false points, non-filing fees, closing costs, origination fees, and service charges," that defendants charged various "junk fees," and that defendants' charging of all these fees and charges was "unconscionable."
Defendants argue that all of these allegations relating to fees and charges are related to the extension of credit to plaintiffs and hence constitute complaints about the amount of interest which plaintiffs paid for their loans. While the court recognizes this, or at least recognizes that some of the charges about which plaintiffs complain would rightly be categorized as interest in accordance with the OCC definition of that term, the court is nevertheless not persuaded that plaintiffs have effectively asserted a claim for usury.
In similar cases, the court has held that claims based on allegations of defendants' charging exorbitant interest rates and other fees and charges that constitute interest were not claims for usury, since the plaintiffs had not alleged or intimated that the charges appropriately categorized as "interest" were unlawful. See Abney v. Magnolia State Bank, Civil Action No. 4:03CV257LN (S.D. Miss. Feb. 23, 2004) (stating that "the fact that `late fees' are included as part of interest on a loan so that the charging of late fees in excess of those allowed by law would be usury does not mean that plaintiffs' reference in their complaint to late fees is a claim for usury. The fact is, plaintiffs have not made a claim for unlawful `late fees' and have not asserted that the combination of `excessive interest' and `late fees' is above the rates that may legally be charged."); Anderson, et al. v. Bank Plus Corp., et al., Civil Action No. 4:01CV136LN, slip op. at 6 (S.D. Miss. Feb. 15, 2002) (concluding that there was no complete preemption by the National Bank Act, for although the plaintiffs did assert that they were charged an "exorbitant interest rate," they never alleged that the interest rate charged was usurious); see also Hunter v. Beneficial Nat'l Bank USA, 947 F. Supp. 446, 451-52 (M.D. Ala. 1996) (rejecting argument that plaintiffs' claims for fraud based on the charging of "excessive" interest rates were completely preempted by National Bank Act since the plaintiffs did not contend that the total interest or the "interest rate" was excessive in violation of any state law).
The same conclusion applies in this case, and plaintiffs' motion to remand is therefore granted.
SO ORDERED.