Opinion ID: 1360640
Heading Depth: 3
Heading Rank: 2

Heading: Banks' Authority to Charge Fees

Text: This finding, however, does not end our inquiry. We must now examine whether the Garnishors' specific conversion claim pursuant to Ohio's garnishment statute is preempted. As mentioned above, state laws, including those governing rights to collect debts, are only exempted from preemption to the extent that they only incidentally affect the exercise of national banks' deposit-taking powers. 12 C.F.R. § 7.4002(c)(4). The Supreme Court has held that states may not prevent or significantly interfere with the national bank's exercise of its powers. Barnett Bank, 517 U.S. at 33, 116 S.Ct. 1103. When state laws significantly impair the exercise of authority, enumerated or incidental under the NBA, the state laws must give way. Watters, 550 U.S. at 12, 127 S.Ct. 1559. We have found that the level of interference that gives rise to preemption under the NBA is not very high. See Ass'n of Banks in Ins., Inc. v. Duryee, 270 F.3d 397, 409 (6th Cir.2001) (rejecting as unpersuasive an attempt to redefine `significantly interfere' as `effectively thwart'). [6] Although the Garnishors have withdrawn their statutory claim, the Banks argue that any interpretation of Ohio's garnishment laws that would allow the Garnishors' conversion claim to proceed would interfere with their ability to collect fees, as authorized by 12 C.F.R. § 7.4002(a), and is thus preempted. The Banks also solicited the OCC's opinion on this matter. In its same opinion letter, the OCC declared that the service fee for the garnishment process was a fee within the meaning of 12 C.F.R. § 7.4002 and therefore that the Banks were authorized to collect these fees. OCC Interp. Letter (Jan. 18, 2007). Attendant to this authority to charge fees is the authority and discretion to determine the amount and method of charging those fees. See 12 C.F.R. § 7.4002(b)(2) (The establishment of non-interest charges and fees, their amounts, and the method of calculating them are business decisions to be made by each bank, in its discretion, according to sound banking judgment and safe and sound banking principles.). By preventing the banks from exacting a fee for processing the garnishment orders through freezing the accounts, the Ohio garnishment laws significantly interfere with this fundamental national bank function by de facto mandating a $1 fee and the method by which that fee is extracted. Moreover, the OCC stated that a bank's authorization to establish fees pursuant to § 7.4002(a) includes the authorization to determine the order in which the fees are posted to a depositor's account. Id. As explained by the OCC, [t]he garnishment fee and the Bank's process of debiting it first are intended to reduce the Bank's costs and compensate the Bank for other potential risks in connection with the legal requirement to process garnishments served on the Bank. Id. Accordingly, if the Banks are authorized to charge the service fee and similarly authorized to post the service fee in whatever order they determine, the OCC argued that the Banks are consequently authorized to collect the service fee even if this process has the effect of reducing the funds that the Garnishors receive: We further confirm that the Bank is authorized by section 24(Seventh) and section 7.4002 to debit the garnishment fee from an account prior to remitting funds to the garnishor. Id. We find this argument persuasive. The requirement that banks freeze accounts immediately upon receipt of a garnishment order is unduly burdensome on national banks because it mandates the order in which those banks carry out their daily account-balancing and account-management functions. The OCC has consistently interpreted § 7.4002(a) as including the authorization to determine the order in which banks may post fees to an account. See, e.g., OCC Interp. Letter No. 1082, 2007 WL 3341502, at  (May 17, 2007); OCC Interp. Letter No. 933, 2002 WL 31955273, at  (August 17, 2001). Likewise, we note that this proposition is consistent with Ohio law, which grants state banks the power to decide that items may be accepted, paid, certified, or charged to the indicated account of its customer in any order. Ohio Rev.Code, § 1304.29(B). We find the OCC's interpretation sensible as it permits the Banks to complete the daily account-balancing tasks that all banks must undertake, both as a general operational matter and specifically in the context of responding to a garnishment notice served on debtors' accounts. The Garnishors cite the Ohio garnishment statute, which states that garnishees are liable at the time of service of the order of garnishment. ORC § 2716.21(D). Relying on this statutory language, the Garnishors claim that Ohio law requires the Banks to freeze the funds in the debtors' accounts at the time of service of the garnishment order and thus that Ohio law prohibits them from further deducting service fees after receiving the garnishment order. We agree with the Banks that the Garnishors' contention that the Banks must immediately freeze the garnished accounts is overly simplistic as the Banks must first undertake a number of procedures to assess what funds are available to be garnished. Thus the Garnishors' interpretation would allow ORC § 2716.13(B) and § 2716.21(D) to significantly interfere not only with the Banks' ability to collect and set their service fees, but also with the Banks' federal authority to complete other transactions and balance their accounts. See Duryee, 270 F.3d at 409. We therefore find that any interpretation of the Ohio garnishment statute that would allow the Garnishors' claim to proceed is preempted by the NBA's grant of authority to the Banks to collect fees without interference. The Garnishors have thus failed to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6), (c).