Smiley v. Citibank South Dakota, 95860

CourtUnited States Supreme Court
Writing for the CourtScalia
Citation116 S.Ct. 1730,135 L.Ed.2d 25,517 U.S. 735
PartiesSMILEY v. CITIBANK (SOUTH DAKOTA), N. A.
Docket Number95860
Decision Date03 June 1996

517 U.S. 735
116 S.Ct. 1730
135 L.Ed.2d 25
SMILEY

v.

CITIBANK (SOUTH DAKOTA), N. A.

Certiorari to the Supreme Court of California.
No. 95-860.
Supreme Court of the United States
Argued April 24, 1996
Decided June 3, 1996
Syllabus *

Petitioner, a resident of California, held credit cards issued by respondent, a national bank located in South Dakota. She filed suit in state court, alleging that late-payment fees charged by respondent, although legal under South Dakota law, violated California law. Respondent moved for judgment on the pleadings, contending that petitioner's state law claims were pre-empted by a provision of the National Bank Act of 1864 that permits a national bank to charge its loan customers "interest at the rate allowed by the laws of the State . . . where the bank is located," 12 U. S. C. Section(s) 85, see Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U. S. 299. The California Superior Court, accepting respondent's argument that credit card late-payment fees constitute ``interest'' for purposes of Section(s) 85, granted respondent's motion. The State Court of Appeal and State Supreme Court affirmed.

Held: The Comptroller of the Currency has reasonably interpreted the term ``interest'' in Section(s) 85 to include late-payment fees, see 12 CFR Section(s) 7.4001(a), and petitioner has failed to establish that the Court should not accord its customary deference to the Comptroller's interpretation of an ambiguous provision of the National Bank Act. Pp. 3-11.

(a) Where a provision of the National Bank Act is ambiguous, the Court, pursuant to Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842-845, defers to reasonable judgments of the Comptroller, the official charged with administering the Act. NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. ___, ___. Petitioner's argument that deference is not owing to the recently adopted 12 CFR Section(s) 7.4001(a) is unpersuasive. The validity of the Comptroller's interpretation is not affected by the fact that the regulation was issued more than 100 years after Section(s) 85 was enacted or that it was litigation, including this very suit, which disclosed the need for the regulation. And the distinction that the regulation makes between those charges designated as interest and those not so classified is not arbitrary or capricious. See Chevron, supra, at 844. Petitioner errs in contending that an agency interpretation that contradicts a prior agency position is necessarily invalid; in any event, she fails to show that a change of official agency position has occurred here. Finally, the issue here, the meaning of Section(s) 85, does not bring into play the pre-emption considerations that petitioner raises. Pp. 3-8.

(b) The Comptroller's interpretation of the statutory term ``interest'' is reasonable. There is no indication that, at the time of the passage of the National Bank Act, common usage of the word ``interest'' or the phrase ``at the rate allowed'' required that interest charges be expressed as functions of time and amount owing. Nor is there support for petitioner's contention that the late fees are ``penalties'' rather than ``interest.'' See Citizens' National Bank v. Donnell, 195 U. S. 369. Pp. 9-11.

11 Cal. 4th 138, 900 P. 2d 690, affirmed.

Justice Scalia delivered the opinion of the Court.

Section 30 of the National Bank Act of 1864, Rev. Stat. Section(s) 5197, as amended, 12 U. S. C. Section(s) 85, provides that a national bank may charge its loan customers "interest at the rate allowed by the laws of the State . . . where the bank is located." In Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U. S. 299 (1978), we held that this provision authorizes a national bank to charge out-of-state credit-card customers an interest rate allowed by the bank's home State, even when that rate is higher than what is permitted by the States in which the cardholders reside. The question in this case is whether Section(s) 85 also authorizes a national bank to charge late-payment fees that are lawful in the bank's home State but prohibited in the States where the cardholders reside-in other words, whether the statutory term "interest" encompasses late-payment fees.

I.

Petitioner, a resident of California, held two credit cards-a "Classic Card" and a "Preferred Card"-issued by respondent, a national bank located in Sioux Falls, South Dakota. The Classic Card agreement provided that respondent would charge petitioner a late fee of $15 for each monthly period in which she failed to make her minimum monthly payment within 25 days of the due date. Under the Preferred Card agreement, respondent would impose a late fee of $6 if the minimum monthly payment was not received within 15 days of its due date; and an additional charge of $15 or 0.65% of the outstanding balance on the Preferred Card, whichever was greater, if the minimum payment was not received by the next minimum monthly payment due date. Petitioner was charged late fees on both cards.

These late fees are permitted by South Dakota law, see S. D. Codified Laws Section(s) 54-3-1, 54-3-1.1 (1990 and Supp. 1995). Petitioner, however, is of the view that exacting such "unconscionable" late charges from California residents violates California law, and in 1992 brought a class action against respondent on behalf of herself and other California holders of respondent's credit cards, asserting various statutory and common-law claims. 1 Respondent moved for judgment on the pleadings, contending that petitioner's claims were pre-empted by Section(s) 85. The Superior Court of Los Angeles County initially denied respondent's motion, but the California Court of Appeal, Second Appellate District, issued a writ of mandate directing the Superior Court to either grant the motion or show cause why it should not be required to do so. The Superior Court chose the former course, and the Court of Appeal affirmed its dismissal of the complaint, 26 Cal. App. 4th 1767, 32 Cal. Rptr. 2d 562 (1994). The Supreme Court of California granted review and affirmed, two Justices dissenting. 11 Cal. 4th 138, 900 P. 2d 690 (1995). We granted certiorari. 516 U. S. ___ (1996).

II.

In light of the two dissents from the opinion of the Supreme Court of California, see 11 Cal. 4th, at 165, 177, 900 P. 2d, at 708, 716 (Arabian, J., dissenting, and George, J., dissenting), and in light of the opinion of the Supreme Court of New Jersey creating the conflict that has prompted us to take this case, 2 it would be difficult indeed to contend that the word "interest" in the National Bank Act is unambiguous with regard to the point at issue here. It is our practice to defer to the reasonable judgments of agencies with regard to the meaning of ambiguous terms in statutes that they are charged with administering. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842-845 (1984). As we observed only last Term, that practice extends to the judgments of the Comptroller of the Currency with regard to the meaning of the banking laws. "The Comptroller of the Currency," we said, "is charged with the enforcement of banking laws to an extent that warrants the invocation of [the rule of deference] with respect to his deliberative conclusions as to the meaning of these laws." NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. ___, ___ (1995) (slip op., at 4) (citations and internal quotation marks omitted).

On March 3, 1995, which was after the California Superior Court's dismissal of petitioner's complaint, the Comptroller of the Currency noticed for public comment a proposed regulation dealing with the subject before us, see 60 Fed. Reg. 11924, 11940, and on February 9, 1996, which was after the California Supreme Court's decision, he adopted the following provision:

"The term `interest' as used in 12 U. S. C. Section(s) 85 includes any payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended. It includes, among other things, the following fees connected with credit extension or availability: numerical periodic rates, late fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash advance fees, and membership fees. It does not ordinarily include appraisal fees, premiums and commissions attributable to insurance guaranteeing repayment of any extension of credit, finders' fees, fees for document preparation or notarization, or fees incurred to obtain credit reports." 61 Fed. Reg. 4869 (to be codified in 12 CFR Section(s) 7.4001(a)).

Petitioner proposes several reasons why the ordinary rule of deference should not apply to this regulation. First, petitioner points to the fact that this regulation...

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524 practice notes
  • Justice Department, Immigration and Naturalization Service,
    • United States
    • Federal Register August 26, 2002
    • August 26, 2002
    ...has determined that the final rule will apply to all pending cases, with one exception. See Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 739-40 (1996); Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995); United States v. Morton, 467 U.S. 822, 835-36 n.21 (1984); United States v.......
  • Meetings: Petition for Rulemaking to Preempt Certain State Laws; public hearing,
    • United States
    • Federal Register March 21, 2005
    • March 21, 2005
    ...legal framework under these parallel statutes. \29\ Greenwood Trust Co. v. Mass., 971 F.2d 818 (1st Cir. 1992), Smiley v. Citibank, 517 U.S. 735 \30\ See FDIC General Counsel Opinions 10 and 11. * * * * * The Roundtable appreciates the FDIC's consideration of this petition. We recognize tha......
  • Part III
    • United States
    • Federal Register April 25, 2007
    • April 25, 2007
    ...by the agency, and intends the agency to have the discretion allowed by an ambiguity. Chevron, 467 U.S. 837, 843; Smiley v. Citibank, 517 U.S. 735, 740-41 If a court were to disagree with our construction of the term ``supervised by'' as used in SMCRA Sec. 701.9, as unambiguous, and were to......
  • Federal and Indian lands programs: Indian lands; definition clarification; agency decision,
    • United States
    • Federal Register April 25, 2007
    • April 25, 2007
    ...by the agency, and intends the agency to have the discretion allowed by an ambiguity. Chevron, 467 U.S. 837, 843; Smiley v. Citibank, 517 U.S. 735, 740-41 If a court were to disagree with our construction of the term ``supervised by'' as used in SMCRA Sec. 701.9, as unambiguous, and were to......
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    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • July 3, 2014
    ...with the notice-and-comment rule-making provisions of the APA. 30 U.S.C. § 936(a); see also Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 741 (1996) (APA notice and comment "designed to assure due deliberation"). Section 725.465(d) originated from just such an exercise of this "bro......
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    ...also United States v. Mead Corp., 533 U.S. 218, 229, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) ; Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735, 741, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996) ; INS v. Cardoza–Fonseca, 480 U.S. 421, 448, 107 S.Ct. 1207, 94 L.Ed.2d 434 (1987) ; Morton v. Rui......
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    • United States District Courts. United States District Court (Columbia)
    • December 22, 2016
    ...implementing agency." Nat'l Cable & Telecoms. Ass'n , 545 U.S. at 981, 125 S.Ct. 2688 (quoting Smiley v. Citibank (South Dakota), N.A. , 517 U.S. 735, 742, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996) ). Deference is due to such agency determinations not only because "Congress ... delegated law-ma......
  • Decker v. Nw. Envtl. Def. Ctr., Nos. 11–338
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    • U.S. Supreme Court
    • March 20, 2013
    ...a degree of discretion, which the courts must respect, regarding the meaning of the statute. See Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735, 740–741, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996). While the implication of an agency power to clarify the statute is reasonable enough, ther......
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    • United States
    • Mondaq United States
    • June 26, 2020
    ...interpreting the federal law it is charged to enforce, a banking agency is typically entitled to some deference, see Smiley v. Citibank, 517 U.S. 735 (1996)), although deference concepts can be less clear when the agency is interpreting federal law in a manner that overrides state law, espe......
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    • United States
    • Environmental Law Reporter Nbr. 45-4, April 2015
    • April 1, 2015
    ...in the enacted law . . . .”). Such reasoning long predates Christensen and Mead . See e.g. , Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 740-41 (1996); Adams Fruit Co. v. Barrett, 494 U.S. 638, 649-50 (1990); Rowan Cos. v. United States, 452 U.S. 247, 253-54 (1981); Batterton v. ......
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  • ARBITRARINESS REVIEW AND CLIMATE CHANGE.
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    • University of Pennsylvania Law Review Vol. 170 Nbr. 4, March 2022
    • March 1, 2022
    ...when its prior policy has engendered serious reliance interests that must be taken into account. Smiley v. Citibank (South Dakota), N. A., 517 U.S. 735, 742 (1996). It would be arbitrary or capricious to ignore such matters. In such cases it is not that further justification is demanded by ......

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