In Foreman v. Bank of Am., N.A., No. 18-cv-01375-BLF, 2019 U.S. Dist. LEXIS 136743 (N.D. Cal. Aug. 13, 2019), Judge Freeman addressed the propriety of a “stop payment” fee imposed by a bank on a consumer who wishes to stop EFT payments.
This case involves a consumer’s right to authorize his bank to transfer funds electronically to third parties through what is aptly named an “electronic fund transfer.” Such transfers are governed by the Electronic Fund Transfer Act, 15. U.S.C. § 1693. If a consumer has authorized a financial institution to transfer funds on a recurring basis on his behalf, the EFTA contemplates that the consumer may also “stop payment” of those preauthorized transfers—that is, withdraw his authorization. Id. § 1693e. In practice, in order to stop payment, the consumer may be required by his financial institution to pay what is known as a “stop-payment fee.” Plaintiffs James Foreman and Alvin Moody allege that Defendant Bank of America, N.A. (“BOA”) charges such a fee. Plaintiffs contend that BOA’s stop-payment fee violates the EFTA and California’s Unfair Competition Law.
Judge Freeman found that the stop payment fees were not prohibited per se by EFTA, nor did EFTA prohibit charging fees that exceeded the actual cost of processing the fee.
When read in the context of the EFTA as a whole, § 1693e unambiguously does not prohibit stop-payment fees. Most importantly, § 1693e has nothing to say about fees at all—it does not expressly prohibit them, as one might expect were it to bar such fees entirely. Even so, silence does not unambiguously require allowance, so a close read is required. In context, § 1693e’s silence on fees should be read not to bar them. As Plaintiffs note, “[t]he primary objective” of the EFTA “is the provision of individual consumer rights.” 15 U.S.C. § 1693(b). But another purpose of the EFTA is “to provide a basic framework [*14] establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems.” Id. Thus, the EFTA aims to clarify the rights and responsibilities for all participants in EFTs, including financial institutions. Indeed, through the EFTA, Congress attempted to clarify “the rights and liabilities of consumers, financial institutions, and intermediaries in electronic fund transfers,” which, due to “the unique characteristics of [EFT] systems,” were previously “undefined.” 15 U.S.C. § 1693(a). . . Having held that the EFTA does not per se prohibit stop-payment fees, the next question is whether the EFTA sets a cap on the fees a bank can charge for stop payments. The answer is no. Plaintiffs’ second theory is that BOA’s $30 fee violates the EFTA because “[t]he amount of the $30 SPF is not tied to any actual costs incurred by [BOA] to cancel preauthorized EFT, and, in fact, grossly exceeds any such costs.” TAC ¶ 84. Plaintiffs argue that even if the EFTA does not prohibit fees per se, it prohibits fees that are not tied to the bank’s actual costs of stopping payment. See Opp. at 11-12. This is so, Plaintiffs argue, because to the extent banks have the right to charge fees under the EFTA, those fees must be bound by some metric, and cost is a metric that Congress at least “plausibl[y]” intended. Id. at 11 (citing 12 C.F.R. § 7.4002). The Court agrees with BOA that this theory fails as a matter of law because the EFTA does not allow this Court to determine the reasonableness of a bank’s fees.