FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FELICIA D. DAVIS, for herself and 

for all others similarly situated, No. 07-56236

Plaintiffs-Appellants, D.C. No.  v. CV-07-02786-R

PACIFIC CAPITAL BANK, N. A., OPINION

Defendant-Appellee. 

Appeal from the United States District Court

for the Central District of California

Manuel L. Real, District Judge, Presiding

Argued and Submitted

November 17, 2008—Pasadena, California

Filed December 24, 2008

Before: Myron H. Bright,* Stephen S. Trott, and

Michael Daly Hawkins, Circuit Judges.

Opinion by Judge Hawkins

*The Honorable Myron H. Bright, Senior United States Circuit Judge

for the Eighth Circuit, sitting by designation. 

16771
COUNSEL

Jordan M. Lewis, Siegel, Brill, Greupner, Duffy & Foster,

P.A., Minneapolis, Minnesota, for the plaintiff-appellant. 

Brad W. Seiling, Manatt, Phelps & Phillips, LLP, Los Angeles, California, for the defendant-appellee.

OPINION

HAWKINS, Circuit Judge: 

Must a creditor who imposes a flat finance charge that does

not vary with the term of a Refund Anticipation Loan refund

a portion of the charge as “unearned interest” under 15 U.S.C.

§1615 when the loan is repaid earlier than anticipated in the

loan agreement? Concluding that the finance charge in question is not an “interest” charge, we answer no and affirm.1

FACTUAL AND PROCEDURAL BACKGROUND

Felicia Davis (“Davis”) brought this action for herself and

others similarly situated against Pacific Capital Bank, N.A.,

1Because we hold that no portion of the $85 finance charge was

unearned “interest,” we need not resolve Pacific’s alternative argument

that Davis’s Unfair Competition Law claim should be dismissed as preempted by the National Bank Act, 12 U.S.C. § 21. 

DAVIS v. PACIFIC CAPITAL BANK 16773
(“Pacific”) under California’s Unfair Competition Law, Cal.

Bus. & Prof. Code §17200. Davis alleges she obtained a “Refund Anticipation Loan” (“RAL”) secured by her anticipated

federal income tax refund, which Davis authorized the Internal Revenue Service to deposit into an account established by

Pacific. The loan document, attached as an exhibit to Davis’s

complaint, provided that $1,115 was credited to Davis, the

credit would cost $85, the Annual Percentage Rate “cost of

[the] credit at a yearly rate” was 57.969%, and that one payment of $1,200 would be due forty-eight days after Pacific

approved the loan. The loan document provided that, if Davis

repaid the loan early, she would not be entitled to a refund of

any part of the $85 finance charge, but the loan document did

not require Davis to pay any additional finance charges if she

repaid the loan after the anticipated forty-eight day period.

Davis alleges her refund was deposited ten days earlier than

anticipated in the loan agreement, and, as a consequence,

Pacific’s failure to refund a $17.74 pro-rated portion of her

finance charge was “unlawful” or “unfair” because § 1615

requires Pacific to refund unearned “interest.” The district

court dismissed Davis’s complaint with prejudice, holding

that the $85 finance charge was not interest. 

JURISDICTION AND STANDARD OF REVIEW

We have appellate jurisdiction pursuant to 28 U.S.C.

§ 1291. We review dismissals for failure to state a claim de

novo. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).

DISCUSSION

[1] Section 1615 states that “[i]f a consumer prepays in full

the financed amount under any consumer credit transaction,

the creditor shall promptly refund any unearned portion of the

interest charge to the consumer.” 15 U.S.C. § 1615(a)(1).

Because Congress did not define the word “interest” as used

in § 1615, it is not immediately obvious whether it encompasses the finance charge at issue. 

16774 DAVIS v. PACIFIC CAPITAL BANK
In other contexts, the term “interest” has been interpreted

broadly. See, e.g., 12 C.F.R. § 7.4001 (defining “interest,” as

used in the National Bank Act, 12 U.S.C. § 85, to include

“numerical periodic rates, late fees, creditor-imposed not sufficient funds (NSF) fees . . . , overlimit fees, annual fees, cash

advance fees, and membership fees”). Charges that do not

vary according to the length of delay before repayment are

sometimes still “interest.” See Smiley v. Citibank (South

Dakota), N.A., 517 U.S. 735, 745-46 (1996) (“Any flat charge

may, of course, readily be converted to a percentage charge

— which was indeed the basis for 19th century decisions

holding that flat charges violated state usury laws establishing

maximum ‘rates.’ ”). Indeed, Pacific has argued successfully

in other cases that the National Bank Act preempts state laws

limiting its RAL fees because of the National Bank Act’s

broad definition of “interest.” See Pac. Capital Bank, N.A. v.

Connecticut, 542 F.3d 341, 353-54 (2d Cir. 2008). 

Within the framework of the Truth in Lending Act

(“TILA”), 15 U.S.C. §§ 1601-1615, and its implementing

Regulation Z, 12 C.F.R. § 226.4, however, the term “finance

charges” is used to refer to this broader category of payments

for credit and the term “interest” is used more narrowly. 

Although TILA itself does not define “interest” or “finance

charge,” see 15 U.S.C. § 1602, Regulation Z defines several

types of “finance charges,” including “[i]nterest [and] time

price differential” under one subsection and “[p]oints, loan

fees, . . . and similar charges” under a separate subsection. 12

C.F.R. § 226.4 (b)(1), (b)(3). “Points” are similar to the

finance charge at issue because both are calculated based on

the size of the original loan balance, but do not increase in

direct proportion to length of time prior to repayment. See,

e.g., 15 U.S.C. § 1602(aa)(4). Regulation Z’s inclusion of

“[p]oints, loan fees” and “similar charges” under a separate

subsection from “interest” or “time price differential” suggests that, under TILA, the two categories are distinct types

of finance charges. Although TILA requires all finance

DAVIS v. PACIFIC CAPITAL BANK 16775
charges to be included when the borrower is informed of the

total “cost of credit” expressed as an Annual Percentage Rate,

this computation is required to enable consumers to compare

loans with different types of finance charges effectively and

does not imply that all finance charges are “interest” or vary

depending on the duration of the loan. See 15 U.S.C. § 1604;

12 C.F.R. § 226.18. 

When interpreting a statutory term that is not explicitly

defined by Congress, we ordinarily defer to the agency

charged with administering the statute. In this case, however,

no agency appears to have decided which framework or set of

definitions applies to § 1615 or interpreted the unearned interest provision directly. 

[2] Accordingly, we turn to § 1615’s legislative history for

help in resolving the ambiguity. Saratoga Sav. & Loan Ass’n.

v. Federal Home Loan Bank Bd., 879 F.2d 689, 693 (9th Cir.

1989). Section 1615 was originally introduced as an amendment to TILA. H.R. 5170, 102d Cong. § 4 (as introduced May

14, 1992). Although language indicating that the provision

would amend TILA was later removed, § 1615 was codified

within the statutory sections comprising TILA. See H.R.

5334, 102d Cong. § 933 (as enacted Oct. 28, 1992); see also

15 U.S.C. §§ 1601-1615. 

[3] Of critical importance was a revision that occurred

before § 1615 was enacted. The original bill required creditors

to refund unearned portions not only of an “interest charge,”

but of any “finance charge.” H.R. 5170 § 4. This change in

terminology, in addition to indicating that § 1615’s drafters

apparently assumed it operated within the TILA framework,

suggests that the drafters considered applying § 1615 to all

finance charges, but then intentionally excluded finance

charges that do not vary according to the term of the loan and

16776 DAVIS v. PACIFIC CAPITAL BANK
limited the provision to require refunds only of unearned “interest,” as defined under TILA.2

[4] In light of this legislative history and absent an agency

regulation invoking the other permissible interpretation, we

interpret § 1615 as not requiring Pacific to refund a portion of

the $85 finance charge at issue here. Pacific’s decision to follow TILA and describe the “cost of [the] credit as a yearly

rate” does not create a triable issue of fact regarding whether

the finance charge may be “interest.” The proper interpretation of “interest” in § 1615 is a question of law. 

[5] California’s Unfair Competition Law “permits violations of other laws to be treated as unfair competition that is

independently actionable.” Leonel v. Am. Airlines, Inc., 400

F.3d 702, 714 (9th Cir. 2005) (citations omitted). Although

Davis argues that Pacific’s practice is both “unlawful” and

“unfair,” both allegations are based on the asserted violation

of § 1615. Concluding Pacific retained no unearned “interest”

under § 1615, we find no violation of federal law to form the

basis of Davis’s single Unfair Competition Law claim. It

therefore must be dismissed. 

AFFIRMED.

2Although we do not rely upon privately held views of legislators when

interpreting a statute, it is also worth noting that at least one of the bill’s

sponsors assured a correspondent that the provision does not require

refunds of “points.” See Roland E. Brandel, et al., Truth in Lending: A

Comprehensive Guide § 33.03, n.3 (2d ed. Supp. 1994). 

DAVIS v. PACIFIC CAPITAL BANK 16777