Silvey v. Numerica Credit Union

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BARBARA SILVEY, on behalf of herself and all others similarly situated, Appellants, v. NUMERICA CREDIT UNION, Respondent.

No. 38047-5-III

Court of Appeals of Washington, Division 3

November 1, 2022

UNPUBLISHED OPINION

PANEL Judges Siddoway, Fearing, Pennell

ORDER GRANTING MOTION TO PUBLISH OPINION

THE COURT has considered the Respondent's motion to publish the court's opinion of August 9, 2022, and the answer and reply thereto, and is of the opinion the motion should be granted. Therefore, IT IS ORDERED, the motion to publish is granted.

LAUREL H. SIDDOWAY Chief Judge

Barbara Silvey brought a putative class action against Numerica Credit Union for breach of contract and related claims contending that contrary to its contracts with members Numerica used her "available" checking account balance rather than her larger "ledger" or "actual" balance to determine her liability for overdraft fees. Concluding that Numerica's agreements could not reasonably be read to support Ms. Silvey's construction, the trial court granted Numerica's CR 12(b)(6) motion to dismiss her contract-related claims.^[1] We agree and affirm.

BACKGROUND ON OVERDRAFT FEE PRACTICE, REGULATION, AND RELATED CLASS ACTION LITIGATION

We begin with an overview of the Federal Reserve Board's (Board's) 2009 amendment of regulation E, implementing the Electronic Fund Transfer Act of 1978, 15 U.S.C. § 1693. Not only did the amendment identify when financial institutions can assess overdraft fees for paying one-time automated teller machine (ATM) and one-time debit card transactions that overdraw a consumer's account, but it also provides a helpful historical background of overdraft services. As explained by the Board:

Historically, if a consumer tried to make a payment using a check that would overdraw his or her deposit account, the consumer's financial institution used its discretion on an ad hoc basis to determine whether to pay the overdraft. If an overdraft was paid, the institution usually imposed a fee on the consumer's account. . . .

In the past, institutions generally provided overdraft coverage only for check transactions. In recent years however, the service has been extended to cover overdrafts resulting from non-check transactions, including ATM withdrawals, debit transactions at POS [point of sale] online transactions, preauthorized transfers, and ACH [automated clearing house network] transactions.

See Electronic Fund Transfers, Final Rule, 74 Fed.Reg. 59,033, 59,033 (Nov. 17, 2009). As the Board's release publishing the rule explains, "From the industry's perspective, automated overdraft services enable institutions to reduce the cost of manually reviewing individual items, and also ensure that all consumers are treated consistently with respect to overdraft payment decisions." Id. at 59,034.

The reason for the amendment to Regulation E was the strongly contrasting view of consumer advocates. According to the Board's release, "consumer advocates assert that overdraft transactions are a high-cost form of lending that trap low- and moderate-income consumers into paying high fees." Id. An urban legend at the time was the $39 latte, accounted for by a $35 overdraft fee because the consumer swiped a debit card for a $4 latte with only $2 in her account.^[2] Most overdraft fees are paid by a small fraction of bank customers: as of 2014, 8 percent of customers incurred nearly 75 percent of all overdraft fees.^[3] "Because of these costs, consumer advocates contend that most consumers would prefer that their bank decline ATM or debit card transactions if the transactions would overdraw their account." Id. at 59,034.

After publication of proposed rulemaking, public comment, and consumer testing, the Board's final rule adopted a requirement that customers affirmatively opt-in to overdraft protection for their ATM withdrawals or one-time debit card transactions. Institutions are required to provide consumers with a notice explaining its overdraft service and give the consumer a reasonable opportunity to affirmatively consent. Id. at 59,040.

The 2009 amendments, which became effective in 2010, protect consumers from these overdraft fees as long as the consumer does not opt in to the additional overdraft protection. For consumers who have nevertheless opted in, a spate of class action lawsuits has followed based on consumers' claims that charges for the overdraft protection have been imposed more frequently than permitted by the agreement signed by the consumer. These consumers allege they were promised that in determining their overdraft status, their bank would look only at settled transactions (the "ledger" or "actual" balance of their account) without discounting that balance for funds that were not available to the customer (their "available balance") either because there was a partial hold on a large deposit or because the consumer had used their debit card for a charge that was approved and pending, but had not yet been charged against their balance.

As described by the Consumer Financial Protection Bureau (CFPB),

[a] ledger-balance method factors in only settled transactions in calculating an account's balance; an available-balance method calculates an account's balance based on electronic transactions that the institutions have authorized (and therefore are obligated to pay) but not yet settled, along with settled transactions. An available balance also reflects holds on deposits that have not yet cleared.

CFPB, Supervisory Highlights, Winter 2015, at 8, https://files.consumerfinance.gov /f/201503_cfpb_supervisory-highlights-winter-2015.pdf [https://perma.cc/2PK6-MFGA].

Ms. Silvey filed her action against Numerica alleging that she and other class members were led by Numerica to believe that it would rely on their ledger balance in assessing overdraft fees. Whether an institution uses a ledger or available balance is a matter of contract between the parties, so the viability of Ms. Silvey's suit turns on the meaning of her contract with Numerica.

THE PRESENT ACTION

Barbara Silvey, a resident of Spokane, has a personal checking account with Numerica. She alleges that Numerica breached its contract by charging fees between December 17, 2017, and April 4, 2018, on five items that did not overdraw her account. The payments on which she alleges she was assessed fees ranged in amount from $12 to $50.

As evidence of her contract with Numerica, Ms. Silvey attaches three documents to her complaint. The first, attached as exhibit A, is entitled Membership and Account Agreement (Account Agreement). The second, attached to Ms. Silvey's complaint as exhibit B, is a several-page personal fee schedule showing changes in terms effective September 1, 2017 (Fee Schedule). The document and its attachments predate all of her complained-of transactions. Finally, attached to her complaint as exhibit C is what Ms. Silvey describes as "another contract document," entitled Member Overdraft Protection (Overdraft Protection). Clerk's Papers (CP) at 24-34, 12.

Ms Silvey's Account Agreement describes a handful of other documents to whose terms and conditions she agreed to by opening an on-line account or by signing an account card: an "Account Card, if applicable, the Funds Availability Policy Disclosure, Truth-in-Savings Disclosure, Electronic Funds Transfer Agreement and Disclosure, Privacy Notice Disclosure and any Account Receipt accompanying this Agreement, and the Credit Union's Bylaws and policies, and any amendments to these documents from time to time which collectively govern your Membership and Accounts." CP at 24. None of these is attached to her complaint.

In granting Numerica's motion to dismiss Ms. Silvey's claim, the trial court relied in part on provisions of the Account Agreement that disclose delays that apply before funds will be fully available in her account. It also relied on provisions disclosing that payments and transfers from her account may not be made unless the funds in her account are both sufficient and available.

The trial court relied on section 8, subsection (d) of the Account Agreement, captioned "Deposit of Funds Requirements; Final Payment," which provides in part:

All Items or Automated Clearing House (ACH) transfers credited to your account are provisional until we receive final payment.

CP at 538.

It relied on section 10 of the Account Agreement, captioned "ACH & Wire Transfers," which provides in part:

We are not obligated to execute any order to transfer funds out of your account if the amount of the requested transfer plus applicable fees exceeds the available funds in your account.

Id.

It relied on section 12, subsection (a) of the Account Agreement, captioned "Transaction Limitations; Withdrawal Restrictions," which provides in part:

We will pay checks or drafts, permit withdrawals, and make transfers from available funds in your account. The availability of funds in your account may be delayed as described in our Funds Availability Policy Disclosure. We may also pay checks of drafts, permit withdrawals, and make transfers from your account from insufficient available funds if you have established an overdraft protection plan or, if you do not have such a plan with us, according to our overdraft policy.

Id.

It relied on section 14, subsection (a) of the Account Agreement, captioned "Overdrafts; Payment of Overdrafts," which provides in part:

If, on any day, the available funds in your share or deposit account are not sufficient to pay the full amount of a check, draft, item, transaction or other item posted to your account plus any applicable fee ("Overdraft") we may pay or return the Overdraft. The Credit Union's determination of an insufficient available account balance may be made

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