SunTrust Bank v. Bickerstaff

Issue: Whether SunTrust’s overdraft fees are considered interest and subject to usury limitations under Georgia law.

Case Summary: ABA filed an amicus brief urging the Georgia Court of Appeals to reverse a trial court decision that held overdraft fees are subject to Georgia usury laws.

In 2010, Jeff Bickerstaff sued SunTrust Bank claiming the bank’s overdraft fees constituted unlawful interest charges which violated Georgia’s civil and criminal usury laws. Under Georgia’s usury law, licensed lenders cannot charge more than 10 percent on a loan of $3000 or less. Bickerstaff alleged SunTrust advanced money to him in amounts less than $3000 and collected overdraft fees in connection with each advance, which exceeded the 10 percent limit.

SunTrust argued its overdraft fees did not constitute interest, but the trial court denied its motion for summary judgment. According to the court, the overdraft fees were subject to Georgia’s usury law. The trial court also determined whether overdraft fees constitute interest for purposes of Georgia’s usury law is a material question of fact to be resolved by the jury. SunTrust appealed the trial court’s decision.

ABA filed its amicus brief supporting SunTrust. First, ABA argued overdraft fees are not subject to Georgia’s usury law because overdraft fees are not interest.  ABA averred that interest is a charge for the time value of money. Moreover, under Georgia law, interest is a charge “for the use of money” “computed” or “precomputed” at a specified rate based on, for example, the principal balance. Conversely, ABA asserted overdraft fees are not interest because they are flat fees charged for overdraft protection services. Overdraft fees are neither charges “for the use of money” nor based on any “computation” or “precomputation." For these reasons, ABA emphasized overdraft fees fall outside the definition of interest under Georgia’s usury laws.

ABA also stressed the loss of overdraft protection would harm Georgia consumers. If adopted more broadly, the trial court’s ruling could force ABA’s members to cease offering overdraft protection services. In effect, this would harm consumers who use these services as a safety net to pay for rent, utilities, or medical bills.

Second, ABA argued the Georgia Legislature and bank regulators have confirmed overdraft fees are not interest. In 2014, the Georgia Legislature amended the State’s usury statutes confirming “overdraft fees shall not be considered interest.” The trial court ruled this “change” did not apply to this litigation. However, ABA argued the trial court erred because the 2014 amendment did not change the usury law but clarified the statutory definition of interest. The amendment explained the law “clarifies the difference between financial charges and interest” and “overdraft … charges ... are not to be considered interest.” Additionally, in 2013, the Georgia Department of Banking and Finance issued a declaratory order confirming “overdraft fees imposed by state-chartered banks in connection with deposit accounts are not subject to state law usury limitations.”

Finally, ABA argued virtually every court agrees that overdraft fees are not interest. In declining to hold overdraft fees are not interest, the trial court staked out a position which is not only contrary to persuasive Georgia authority but also to the overwhelming consensus among courts. ABA highlighted that the Tenth and Eleventh Circuits found overdraft fees are not considered interest. Further, nearly every federal court that has addressed the issue has concluded overdraft fees are not considered interest. The trial court did not acknowledge, let alone engage with, the reasonings of these courts. ABA urged the Georgia Court of Appeals to conform to the decisions of the Tenth Circuit, Eleventh, Circuit, and various federal courts and hold overdraft fees are not considered interest.