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| ## Comptroller of the Currency                                        |
|                                                                       |
| > Administrator of National Banks                                     |
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Washington, DC 20219

July 27, 2005 **Interpretive Letter #1054**

**March 2006**

Dan C. Stevenson **12 USC 24(7)**

Representative

Indiana House of Representatives

Third Floor State House

Indianapolis, IN 46204

Dear Representative Stevenson:

Thank you for your letter forwarding an e-mail from your constituent,
**\[ \]**, and a letter from J. Philip Goddard, Deputy Director and
Chief Counsel of the Indiana Department of Financial Institutions. Both
**\[ \]**'s e-mail and Mr. Goddard's letter raise concerns about fees
charged by a national bank for cashing a check presented for payment by
a non-accountholder that is drawn upon the account of one of the bank's
customers. Fees a bank charges for cashing a check presented by a
non-accountholder are sometimes described as convenience fees charged
for the service of making funds immediately available to
non-customers.[^1] The fees also are referred to as "on-us check cashing
fees" or "on-us fees." I appreciate this opportunity to explain national
banks' authority to charge such fees.

The OCC has issued several letters explaining that Federal law
authorizes national banks to charge on-us fees.[^2] As these letters
describe, a Federal statute, 12 U.S.C. § 24(Seventh), authorizes
national banks to engage in activities that are part of, or incidental
to, the business of banking, as well as to engage in certain specified
activities listed in the statute. Cashing checks is part of the business
of banking. A national bank's authority to provide products or services,
such as check cashing, to its customers encompasses the ability to
charge a fee for the product or service.[^3] This authority to charge
fees for services is expressly set forth in the OCC's regulations at 12
C.F.R. § 7.4002. After reviewing information submitted to the OCC by the
banks that sought our opinion,[^4] we concluded that the on-us fees
charged by each bank were authorized pursuant to this Federal statute
and regulation.

That conclusion was subsequently upheld by the U.S. Court of Appeals for
the Fifth Circuit. In a case concerning the applicability to national
banks of a Texas statute prohibiting on-us fees, the Fifth Circuit
confirmed that the OCC had the authority to determine that Federal law
authorized a national bank to charge such fees and expressly upheld the
OCC's determination. Moreover, the appeals court affirmed the lower
court's decision that the Texas statute prohibiting on-us fees was
preempted by Federal law. As the Fifth Circuit's decision thus makes
clear, state statutes that prohibit the fees do not apply to national
banks.[^5]

Mr. Goddard\'s letter makes reference to a memorandum that he has
prepared opining that charging an on-us fee constitutes wrongful
dishonor of a check under the Indiana UCC if the payee is a holder in
due course. The March 2000 Memorandum was written before the Fifth
Circuit\'s decision, however, and provided that Indiana regulators
should apply this interpretation of Indiana law "pending a resolution on
the Federal level." As we note above, and as Mr. Goddard\'s letter to
you acknowledges, Federal courts have upheld the OCC\'s determination
that national banks may charge on-us fees, notwithstanding contrary
state law. We also note that the March 2000 Memorandum's conclusion
concerning the Indiana UCC is limited to financial institutions
operating under a state charter. The OCC takes no position on the
interpretation of the Indiana UCC that the March 2000 Memorandum sets
forth for state banks. [^6]

I trust this explanation is helpful in understanding national banks'
authority to charge on-us fees. If you have any further questions,
please do not hesitate to contact me or Michele Meyer, an attorney on my
staff, at (202) 874-5090.

Sincerely,

signed

Julie L. Williams

Acting Comptroller of the Currency

[^1]: **\[ \]**, for example, explains that he has incurred these fees
    rather than depositing the checks in his own institution, which
    would place a hold of up to five days on the funds.

[^2]: OCC Interpretive Letters Nos. 932, 933, and 934 (May 2002). These
    letters are publicly available on the OCC's website at
    [www.occ.treas.gov/interp/monthly.htm]{.underline}.

[^3]: *See Bank of America, N.A. v. City and County of San Francisco*,
    309 F.3d 551 (9^th^ Cir. 2002), *cert. denied*, 123 S. Ct. 2220
    (2003) (city ordinances prohibiting ATM fees held preempted and
    permanently enjoined); *Metrobank v. Foster*, 193 F. Supp. 2d 1156
    (S.D. Iowa 2002) (national bank authority to charge fees for ATM use
    preempted Iowa prohibition on such fees). *See also Bank One v.
    Guttau*, 190 F.3d 844 (8^th^ Cir. 1999) (various restrictions on the
    operation of ATMs imposed by Iowa law held preempted and permanently
    enjoined).

[^4]: The OCC requires a bank seeking an opinion about whether a
    particular type of fee is authorized to provide certain information
    that is described in the applicable regulation. *See* 12 C.F.R.
    § 7.4002(b). A national bank's authority to charge a particular fee
    is not conditioned on obtaining such an opinion, however.

[^5]: *Wells Fargo Bank of Texas, N.A. v. James*, 321 F.3d 488 (5^th^
    Cir. 2003), *aff'g* 184 F. Supp. 2d 588 (W.D. Tex 2001).

[^6]: As we recognized in our opinions addressing on-us fees, however,
    the wrongful dishonor provision in the UCC also is subject to a
    different interpretation than the one advanced in Mr. Goddard's
    memorandum. The banks requesting our opinion provided a legal
    analysis indicating that an on-us fee would not be considered
    wrongful dishonor so long as the bank's agreement with its
    accountholder provided for the imposition of check cashing fees.
    This analysis was included in the submissions made by the banks to
    demonstrate their consideration of any litigation risk presented by
    charging such fees. The OCC did not consider it for purposes of
    opining on the proper interpretation of the UCC. *See* OCC
    Interpretive Letters Nos. 932, 933, and 934.