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Fawcett v. Citizens Bank, N.A.

United States District Court, D. Massachusetts

February 27, 2018

Barbara Fawcett, Individually and on behalf of all Others similarly situated, Plaintiff,
v.
CITIZENS BANK, N.A., Defendant.

          MEMORANDUM OF DECISION AND ORDER

          TIMOTHY S. HILLMAN DISTRICT JUDGE

         Background

         Plaintiff, Barbara Fawcett (“Fawcett” or “Plaintiff”) has filed suit, individually and on behalf of other similarly situated persons, against Citizens Bank, N.A. (“Citizens”) alleging a claim for violation of the National Bank Act, 12 U.S.C. § 85 (the “Act”). More specifically, Fawcett alleges that Citizen violated the Act by mischaracterizing charges to her account as “Sustained Overdraft Fees, ” which were in fact interest charges with an annual rate of interest that exceeded the rate permitted to be charged under the Act.

         This Order addresses Plaintiff's Motion for Class Certification And To Hold Motion In Abeyance Pending Class Discovery (Docket No. 5), and Defendant Citizen Bank, N.A.'s Motion To Dismiss And/Or Stay And To Compel Arbitration (Docket No. 12).

         Discussion

         A Summary of Fawcett's Claim

         When a Citizens Bank checking account customer incurs a debit to their account (such as a check, ATM withdrawal, or debit card transaction) which exceeds the amount of money in that account, and Citizens honors the debit (i.e., pays the check, permits the ATM withdrawal, or pays the debit card transaction) and charges the customer an “Overdraft Fee of $35.” If Citizens returns a check presented for payment by one of its customers due to “insufficient funds”, i.e., does not honor the check, it charges $35 against the customer's account, which Citizens refers to as a “Returned Item Fee.” If Citizens returns the check due to insufficient funds, the $35 Returned Item Fee is the only fee Citizens Bank charges as a result of a check having been presented for payment which exceeded the balance remaining in the account. If, however, Citizens honors an overdraft by advancing the deficiency to the customer, and if the customer does not repay that advance (by depositing sufficient funds into the account to bring the account balance positive or at least zero) within a very short period, Citizens charges what it calls a “Sustained Overdraft Fee.” This charge is in addition to the initial “Overdraft Fee” Citizens charges at the time the customer's account was first overdrawn. Citizens continues to charge the so-called “Sustained Overdraft Fee” over regular intervals until the customer repays Citizens' monetary advances by returning his or her account to a positive balance.

         Fawcett acknowledges that the initial “Returned Item Fee” and the “Overdraft Fee, ” are “fees” Citizens charges for the service of responding when a customer causes a check or other debit to be presented when there are insufficient funds in the customer's account. However, she contends that the so-called “Sustained Overdraft Fee” is, in reality, interest that Citizens charges to its customers for the use, forbearance, or detention of the money it has “loaned” to its customer by advancing the funds necessary to pay the overdraft. She contends that the only service or thing of value that Citizens provides in exchange for the so-called “Sustained Overdraft Fee” is the continued use of the funds it previously loaned to the customer, which are still owed by the customer to Citizens. Thus, according to Fawcett, the “Sustained Overdraft Fee” is, in fact, an interest charge. The Act limits the interest rate which a national bank such as Citizens can charge its customers. Fawcett argues that the annualized interest rate which Citizens charges customers in the guise of “Sustained Overdraft Fees, ” is substantially greater than the maximum interest rate that the Act permits Citizens to charge.

         Citizens' Motion to Compel Arbitration

         Citizens, invoking the Federal Arbitration Act, 9 U.S.C. § 2 et seq. (“FAA”), asserts that because the parties have an agreement to arbitrate, this Court must compel arbitration and stay or dismiss Fawcett's claims pending arbitration. Fawcett argues that she was never party to the agreement to arbitrate because Citizens cannot establish that she was ever provided a copy of the agreement to arbitrate and assented to it.

         Facts Relating to the Motion to Compel Arbitration

         On or about July 11, 2013, Fawcett opened a checking account (the “Account”) with Citizens. At the time that she opened the Account, Fawcett signed a signature card which included the following statement:

By signing below, I acknowledge that I have read and understood [Citizens'] Deposit Account Agreement and related fee schedule… each as amended from time to time (all collectively and each individually referred to as “the Agreement”). By signing below, I agree to all the terms of the Agreement.

         At the time Fawcett opened her account, she was provided a Citizens'

         Personal Deposit Account Agreement (“PDAA”) which included the terms and conditions applicable to her account. By her signature on the signature card, Fawcett agreed to the terms of the PDAA as it would be amended from time to time.

         The PDAA[1] states:

Our Agreement with You
This Personal Deposit Account Agreement is the agreement that governs each personal deposit account you have opened with us. This agreement replaces all previous personal deposit account agreements. Please read it carefully and retain it for future reference. By providing a written or electronic signature on a signature card or other agreement to open your account or by using any of our deposit account services, you and anyone else identified as an owner of the account agree to the terms contained in this agreement. This agreement refers to and includes Personal Account Fees and Features ...

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