Laskaris v. Fifth Third Bank (In re Fifth Third Early Access Cash Advance Litig.), 18-3390

Decision Date28 May 2019
Docket NumberNo. 18-3390,18-3390
Citation925 F.3d 265
Parties IN RE: FIFTH THIRD EARLY ACCESS CASH ADVANCE LITIGATION. Lori Laskaris; Daniel Laskaris; Jessie McQuillen; Brian C. Harrison ; Janet Fyock; William R. Klopfenstein; Adam McKinney ; Donald E. Adanich; Lyn A. Adanich; Scott D. Little ; Diana Horn, on behalf of themselves and all others similarly situated, Plaintiffs-appellants, v. Fifth Third Bank, Defendant-appellee.
CourtU.S. Court of Appeals — Sixth Circuit

GRIFFIN, Circuit Judge.

This putative class action concerns defendant Fifth Third Bank’s "Early Access" cash advance loan program, a short-term lending option the bank offered to certain customers who held eligible checking accounts with it. Fifth Third, as both lender and bank, had direct access to borrowers’ checking accounts. It deposited Early Access loans straight into borrowers’ accounts and then paid itself back automatically—plus a 10% "transaction fee"—after a direct deposit posted or thirty-five days elapsed, whichever came first. The contract governing the program disclosed the annual percentage rate ("APR") as 120% in all cases.

Plaintiffs held checking accounts with Fifth Third and obtained Early Access loans, which were paid back automatically fewer than thirty days later. They contend that the 120% figure is false and misleading, pointing to the contract’s novel method for calculating APR—one in which the APR is always the same regardless of the length of the loan. Calculated using a more conventional method, in which the APR is tied to the length of the loan, plaintiffs assert that the APR was in fact as high as 3650%.

Plaintiffs brought a variety of state and federal claims below, but this appeal is limited to a single breach-of-contract claim under Ohio law. The district court granted Fifth Third’s Rule 12(b)(6) motion in relevant part and dismissed the breach-of-contract claim, holding that the contract unambiguously disclosed the method for calculating APR despite admitting that the result "may be misleading." On review, we hold that the contract was ambiguous because it provided two different descriptions of "APR" that are inconsistent with each other and cannot be reconciled. The first was a definition, lifted verbatim from a federal regulation, that describes the APR as being "expressed as a yearly rate"; the second was the method used to calculate it, which is not based on a year or any other time period. The ambiguity raises a question of fact that should be resolved in the district court on remand.


Fifth Third is a state-chartered, federally insured bank headquartered in Ohio, with branches in several states, including Ohio, Michigan, Kentucky, and Tennessee. "Early Access" was a short-term "cash advance" program in which eligible customers who held checking accounts with Fifth Third could obtain a loan up to $ 1000 deposited directly into their accounts. Plaintiffs describe Early Access as a type of "payday" loan: a "small loan[ ] due on the borrower’s next ‘payday.’ " Fifth Third disputes this characterization, but admitted in the program’s terms and conditions that Early Access "is an expensive form of credit ... designed to help our customers meet their short-term borrowing needs .... We do not recommend continued use of the service."

Early Access was different in that Fifth Third, the lender, also had access to its customers’ checking accounts. When a customer requested a cash advance, Fifth Third deposited the amount into that individual’s checking account. When a customer later received a direct deposit of $ 100 or more, Fifth Third automatically deducted the amount of the loan from the account, plus a "transaction fee" equal to 10% of the loan’s amount. Fifth Third did this even if the deduction resulted in a negative balance on the account, though it did not charge an overdraft fee for this transaction. Customers also had the option of making manual payments. If the loan had not been repaid in full after thirty-five days, Fifth Third automatically deducted the outstanding balance and the loan’s transaction fee from the account, even if no qualifying direct deposit had posted. Thus, the term of the loan was always thirty-five days or shorter.

Two documents explained the contours of the Early Access program: the "Summary of Key Features and Terms & Conditions" and the "Frequently Asked Questions," which were incorporated into the terms and conditions by reference (collectively, "the contract"). According to plaintiffs, the contract here was one of adhesion, as it was "drafted and imposed by Fifth Third" and "presented to ... customers on a ‘take it or leave it’ basis." The contract explained that "there is no interest charge associated with an Advance," and customers are charged the same 10% transaction fee regardless of the length of the term. It included several examples of how this works in practice, including this one:

Lee Advanced multiple times in the week leading up to payday. She Advanced $ 20 two times on Monday, $ 20 on Tuesday, and $ 40 on Thursday, for a total of $ 100 in Fifth Third Early Access Advances prior to her next qualifying direct deposit. When Lee receives her next qualifying direct deposit, the bank will withdraw $ 110 as payment from her Associated Checking Account ($ 100 in Fifth Third Early Access Advances and $ 10 in corresponding transaction fees).

In several places, the contract discussed the Early Access program’s "annual percentage rate" ("APR"). This term is familiar to many consumers and widespread across the financial sector, undoubtedly because the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. , and federal regulations "require[ ] lenders to make certain prominent disclosures when extending credit, including the APR." Rucker v. Sheehy Alexandria, Inc. , 244 F. Supp. 2d 618, 622 (E.D. Va. 2003) ; see Truth in Lending Regulations, Regulation Z, 12 C.F.R. § 226.1 et seq. TILA specifically requires that lenders use the term "annual percentage rate." 15 U.S.C. § 1638(a)(4). One regulation defines "annual percentage rate [a]s a measure of the cost of credit, expressed as a yearly rate." 12 C.F.R. § 226.14(a). Another provides a bit more detail: "[t]he annual percentage rate is a measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made." 12 C.F.R. § 1026.22(a)(1).

The contract described the APR for the Early Access program as follows:

                  Interest Rate
                  Annual Percentage Rage (APR) for 120%
                Cash Advances
                  Annual Fee None
                Transaction Fees 10% of the amount of each cash
                  • Cash Advance                       Advance
                  Penalty Fees
                  • Late Payment                       None
                  • Over-the-Credit Limit              None

The 120% APR also appeared on the monthly bank statements Fifth Third provided to its customers. After clarifying its use of "APR" as an abbreviation for "Annual Percentage Rate," the contract explained that "[t]he APR is a measure of the cost of credit, expressed as a yearly rate." It also stated that "[w]e show the Annual Percentage Rate (APR) for Fifth Third Early Access so our customers can compare the cost of using this product against other forms of credit." But the formula it provided for calculating APR is unique, arrived at by "dividing the transaction fee by the Advance amount and multiplying the quotient by the number of statement cycles within a year. For example, $ 100 Advance with a $ 10 transaction fee = $ 10/$ 100 = 0.1% X 12 cycles = 120% APR." The result is that the APR calculated this way is always 120%, regardless of the length of the loan.

Plaintiffs all held checking accounts with Fifth Third, sought and obtained loans through the Early Access program, and paid back their loans fewer than thirty days after receiving them—usually by automatic deduction when a direct deposit posted to their accounts. They contend that Fifth Third’s disclosure of 120% APR is false and misleading because "Early Access Loans carry a 120% APR only when repaid in [exactly] 30 days," and in practice, the APR is usually much higher, with an upper limit of 3650%. Plaintiffs assert that Fifth Third "has made up a formula that always yields 120% and calls it the ‘APR,’ even though the 120% number is completely arbitrary and bears no relation to the annual cost of the Early Access credit." They essentially accuse Fifth Third of running a "bait and switch" scheme, suggesting that the listed APR is comparable to APRs shown by other lenders before changing the meaning of "APR" in the contract to make its terms appear more favorable than they are. Similarly, amici argue that the contract’s APR is not really an APR at all, because "a true APR must be tied to the actual length of time the loan balance is outstanding."


Plaintiffs William R. Klopfenstein and Adam McKinney filed a complaint against Fifth Third in the United States District Court for the Northern District of Ohio. Their case was eventually transferred to the Southern District of Ohio and consolidated, pursuant to Federal Rule of Civil Procedure 42(a)(2), with four other cases that also originated elsewhere. Plaintiffs’ post-consolidation amended complaint asserted eighteen causes of action, some on behalf of the entire proposed class and others on behalf of proposed state-specific subclasses. Relevant to this appeal, Count One pleaded violations of TILA and Regulation Z, and Count Four pleaded breach of contract.1 Specifically, Count Four alleged that Fifth Third breached the terms of the Early Access Loans contract "by charging Plaintiffs and the other Class members APRs in excess of 120% on Early Access Loans," and "by failing to provide an accurate APR summary for Early Access Loans on monthly bank statements."

Fifth Third moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted Fifth Third’s...

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