In both October and November of 2012, the Powells were assessed late fees on their home mortgage loan, even though they had made full, on-time payments of those months’ installments. The late fees violated the West Virginia Consumer Credit Protection Act, which provides that payments must be applied first to current installments and that only one late fee can be collected on any installment.
The Powells filed suit in West Virginia state court on behalf of themselves and other West Virginia citizens who were charged late fees by Huntington National Bank for months in which they made full and timely principal and interest payments. The complaint alleged that the bank violated West Virginia law by charging late fees when no late fees were owed.
The bank removed the case to federal court, then moved for judgment on the pleadings, arguing that the Powells’ claims are completely preempted by sections 85 and 86 of the National Bank Act. These provisions allow national banks to charge “interest at the rate allowed by the laws of the State . . . where the bank is located,” and create an exclusive federal cause of action for claims that a national bank engaged in a “usurious transaction” by “charging a rate of interest greater than is allowed.”
The district court denied the bank’s motion. The court explained that sections 85 and 86 preempt usury claims, not “purely state consumer protection claims that do not challenge the rate of interest charged.” The court determined that because the Powells’ claims challenged the bank’s practice of charging a late fee when one should not have been charged in the first place, not the rate of interest charged, the claims were not preempted by the National Bank Act.
The bank appealed to the U.S. Court of Appeals for the Fourth Circuit, and Public Citizen Litigation Group served as co-counsel for the Powells on appeal. On January 28, 2016, the day after hearing oral argument, the Fourth Circuit dismissed the appeal as improvidently granted.