Document: 517 U.S. 735116 S.Ct. 1730135 L.Ed.2d 25 SMILEYv.CITIBANK (SOUTH DAKOTA), N. A.Certiorari to the Supreme Court of California. No. 95-860. United States Argued April 24, 1996 Decided June 3, Syllabus* Petitioner, a resident California, held credit cards issued by respondent, national bank located in South Dakota. She filed suit state court, alleging that late-payment fees charged although legal under Dakota law, violated California law. Respondent moved for judgment on pleadings, contending petitioner's law claims were pre-empted provision National Bank Act 1864 permits charge its loan customers "interest at rate allowed laws State . where is located," 12 U. S. C. Section(s) 85, see Marquette Nat. Minneapolis v. First Omaha Service Corp., 439 299. The Superior Court, accepting respondent's argument card constitute ``interest'' purposes granted motion. Appeal and affirmed. Held: Comptroller Currency has reasonably interpreted term 85 include fees, CFR 7.4001(a), petitioner failed establish should not accord customary deference Comptroller's interpretation an ambiguous Act. Pp. 3-11. (a) Where ambiguous, pursuant Chevron A. Inc. Natural Resources Defense Council, Inc., 467 837, 842-845, defers reasonable judgments Comptroller, official with administering NationsBank C., Variable Annuity Life Ins. Co., 513 ___, ___. Petitioner's owing recently adopted 7.4001(a) unpersuasive. validity affected fact regulation was more than 100 years after enacted or it litigation, including this very suit, which disclosed need regulation. And distinction makes between those charges designated as interest so classified arbitrary capricious. See Chevron, supra, 844. Petitioner errs agency contradicts prior position necessarily invalid; any event, she fails show change occurred here. Finally, issue here, meaning does bring into play pre-emption considerations raises. 3-8. (b) statutory reasonable. There no indication that, time passage Act, common usage word phrase ``at allowed'' required be expressed functions amount owing. Nor there support contention late are ``penalties'' rather ``interest.'' Citizens' Donnell, 195 369. 9-11. 11 Cal. 4th 138, 900 P. 2d 690, Justice Scalia delivered opinion Court. 1 Section 30 1864, Rev. Stat. 5197, amended, provides may located." In 299 (1978), we authorizes out-of-state credit-card bank's home State, even when higher what permitted cardholders reside. question case whether also lawful but prohibited reside-in other words, "interest" encompasses fees. I. 2 two cards-a "Classic Card" "Preferred Card"-issued Sioux Falls, Classic Card agreement provided respondent would fee $15 each monthly period make her minimum payment within days due date. Under Preferred agreement, impose $6 if received 15 date; additional 0.65% outstanding balance Card, whichever greater, next both cards. 3 These D. Codified Laws 54-3-1, 54-3-1.1 (1990 Supp. 1995). however, view exacting such "unconscionable" from residents violates 1992 brought class action against behalf herself holders cards, asserting various common-law claims.1 85. Los Angeles County initially denied motion, Appeal, Second Appellate District, writ mandate directing either grant motion cause why do so. chose former course, affirmed dismissal complaint, 26 App. 1767, 32 Rptr. 562 (1994). review affirmed, Justices dissenting. 690 (1995). We certiorari. 516 ___ (1996). II. 4 light dissents 4th, 165, 177, 2d, 708, 716 (Arabian, J., dissenting, George, dissenting), New Jersey creating conflict prompted us take case,2 difficult indeed contend unambiguous regard point It our practice defer agencies terms statutes they administering. 842-845 (1984). As observed only last Term, extends banking laws. "The Currency," said, "is enforcement extent warrants invocation [the rule deference] respect his deliberative conclusions these laws." (1995) (slip op., 4) (citations internal quotation marks omitted). 5 On March 1995, Court's noticed public comment proposed dealing subject before us, 60 Fed. Reg. 11924, 11940, February 9, 1996, decision, he following provision: 6 `interest' used includes compensating creditor prospective extension credit, making available line default breach borrower condition upon extended. includes, among things, connected availability: numerical periodic rates, sufficient funds (NSF) overlimit annual cash advance membership ordinarily appraisal premiums commissions attributable insurance guaranteeing repayment finders' document preparation notarization, incurred obtain reports." 61 4869 (to codified 7.4001(a)). 7 proposes several reasons ordinary apply First, points enactment seemingly result similar litigation participated amicus curiae side banks. 100-year delay difference. To sure, interpretations long standing come certain credential reasonableness, since rare error persist. But neither antiquity nor contemporaneity statute validity. because presumption drafted provisions question, present hearings, spoke principal sponsors; Congress, left ambiguity meant implementation agency, understood resolved, first foremost, desired (rather courts) possess whatever degree discretion allows. 843-844. matter suit. Of course deny "to litigating positions wholly unsupported regulations, rulings, administrative practice," Bowen Georgetown Univ. Hospital, 488 204, 212 (1988). deliberateness positions, their authoritativeness, suspect. have here full-dress regulation, himself notice-and-comment procedures Administrative Procedure designed assure deliberation, 553; Thompson Clark, 741 F. 401, 409 (CADC 1984). That irrelevant. 8 Second, contends deserving "there rational basis distinguishing [it] denominated `non-interest.'" Reply Brief 14. disagree. analytical matter, seems perfectly possible draw line, does, (1) "payment extended," (2) all payments. broadest sense payments way loan-including reimbursement lender's costs processing application, insuring loan, appraising collateral-can regarded "compensating [the] credit." quite distinguish, specifically assigned expenses assessed simply borrower's default. logic, least, "arbitrary [or] capricious," thereby disentitled S., Whether capricious" means-or perhaps (what excludes deference) "manifestly contrary statute," will discuss Part opinion. 9 argues entitled inconsistent taken past. mere fatal. Sudden unexplained change, see, e.g., Motor Vehicle Mfrs. Assn. States, Farm Mut. Automobile 463 29, 46-57 (1983), account legitimate reliance interpretation, Pennsylvania Industrial Chemical 411 655, 670-675 (1973); NLRB Bell Aerospace 416 267, 295 (1974), "arbitrary, capricious abuse discretion," 706(2)(A). pitfalls avoided, invalidating, whole leave ambiguities implementing agency. 10 case, think anything can accurately described agency's Notice Proposed Rulemaking asserted new "reflect[s] current [Office (OCC)] interpretive letters," 11929 (1995), Statement Basis Purpose accompanying final adoption stated "[t]he ruling consistent OCC letters area reflects briefs pending many Federal courts," 4859 (1996) (citing letters). 1964 letter President's Committee Consumer Interests, states "[c]harges payments, life insurance, recording documentary stamp illustrations made some banks properly characterized interest," 5a; 1988 Deputy Chief Counsel stating "it my [under 85] determine foregoing [including fees] Iowa residents," Interpretive Letter 452, reprinted 1988-1989 Transfer Binder, CCH Banking L. Rep. Para(s) 85,676 p. 78,064 doubt statements itself binding policy-the former, too informal, latter purported represent response inquiry concerning particular argued reflect policy, since, addition contradicting contradict one another-the nationally uniform concept, determined reference What show, anything, good reason promulgate order eliminate uncertainty confusion. offering deference, pre-empts "presumption pre-emption" announced Cipollone Liggett Group, 505 504, 518 (1992), effect trumps requires court own avoid possible) This confuses substantive (as opposed pre-emptive) pre-emptive. assume (without deciding) must always decided de novo courts. here; dismissed petitioners' "exportation" rates "significantly impair ability enact effective usury laws" observation "[t]his impairment been implicit structure [T]he protection legislative plea alter further end better addressed wisdom Congress Court." Id., 318-319. (like Cipollone) deal pre-emption, hence raises.3 III. Since concluded deserves represents best statute, one. answer obviously yes. 13 "do vary based owed delay." 32-33. limitation read term. Most dictionaries era did place "interest." See, J. Bouvier, A Law Dictionary 652 (6th ed. 1856) ("The compensation paid lender debtor use [of money]"); Burrill, Glossary 90 (2d 1860); American English Encyclopedia 379 (J. Merrill 1890). Wharton, Lexicon Jurisprudence 391 (2d. Amer. 1860). definition ourselves set out Brown Hiatts, Wall. 185 (1873), shortly likewise contained limited function owing: "Interest fixed parties, forbearance money damages detention." Hollowell Southern Building & Loan Assn., 120 286, E. 781 (1897) ("[A]ny borrower] excess interest, called `fines,' `charges,' `dues,' `interest,' usurious"). 14 suggests another source requirement timeand rate-based: authorized notes, charging "at allowed" State. requires, view, surprising find pointless. Any flat may, readily converted percentage charge-which 19th-century decisions holding establishing maximum "rates." Craig Pleiss, Pa. 271, 272-273 (1856); Hollowell, E., 781. apparent home-state-approved permissible unlawful. prevents conclusion refusal give "rate" narrow demands unreasonable. 1849 edition Webster's gives definitions "[p]rice thing." Webster, Language 910. illustrate word, examples: "A king purchase territory dear rate. prescribed law." Ibid. Cf. 421 (defining "rate exchange" "the price bill drawn country another, sold former"). cannot "penalties." dichotomy, Meilink Unemployment Reserves Comm'n Cal., 314 564, 570 (1942). involved Bankruptcy disallowed debts governmental entities "as penalty," except pecuniary loss sustained act penalty arose, accrued thereon according 566. Obviously, uses mean exacted commercial compensation, penalty. often takes connotation expressly word: "car," example, broader speaking "cars taxis." contradistinction "penalty," imposed purpose. More relevant Kansas City 369 (1904), involve (or, precisely, predecessor, 5197). There, 12% overdrafts violate setting 8% ceiling because, inter alia, overdraft "was failure pay debt due." 373-374. hand: suggestions twelve per cent seem answer." 374. 16 devotes much brief constitutionally defined State-a implicated Because unreasonable one, decision 17 ordered. * syllabus constitutes part prepared Reporter Decisions convenience reader. Detroit Lumber 200 321, 337. By claims, complaint alleged duty faith fair dealing; unjust enrichment; fraud deceit; negligent misrepresentation; contract. violation Bus. Prof. Code Ann. 17200 (West 1996) (prohibiting unlawful business practices) Civ. 1671 1985) (invalidating liquidated damages). Sherman Citibank (South Dakota), A., 143 35, 668 1036 Colorado Appeals Circuit same Copeland MBNA America Bank, 907 87 (Colo. 1995); Greenwood Trust Co. Massachusetts, 971 818, 829-831 (CA1 1992) (dictum), cert. denied, 506 1052 (1993). four-line footnote page reply brief, unpursued oral argument, raised deferring involving antecedent transactions retroactive, 208-209 20, n. 17. might substance replaced interpretation-which, discussed, not. Where, addressing clear guidance, absurd ignore authoritative pronouncement means.

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