Smiley v. Citibank (South Dakota), N. A.,
517 U.S. 735 (1996)

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CERTIORARI TO THE SUPREME COURT OF CALIFORNIA No. 95-860. Argued April 24, 1996-Decided June 3,1996

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. §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 § 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 § 85 to include late-payment fees, see 12 CFR § 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.739-747.

(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. 251, 256-257. Petitioner's argument that deference is not owing to the recently adopted 12 CFR § 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 § 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 § 85, does not bring into play the pre-emption considerations that petitioner raises. Pp.739-744.


(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' Nat. Bank of Kansas City v. Donnell, 195 U. S. 369. Pp. 744-747.

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

SCALIA, J., delivered the opinion for a unanimous Court.

Michael D. Donovan argued the cause for petitioner.

With him on the briefs were Pamela P. Bond, Patrick J. Grannan, Robin B. Howald, and Michael P. Malakoff Richard B. Kendall argued the cause for respondent.

With him on the brief were Michael H. Strub, Jr., Louis R. Cohen, Ronald J. Greene, and Christopher R. Lipsett.

Irving L. Gornstein argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General Days, Assistant Attorney General Hunger, Deputy Solicitor General Bender, Barbara C. Biddle, Jacob M. Lewis, Julie L. Williams, L. Robert Griffin, and Joan M. Bernott. *

*Briefs of amici curiae urging reversal were filed for the Commonwealth of Massachusetts et al. by Scott Harshbarger, Attorney General of Massachusetts, Ernest L. Sarason, Jr., Assistant Attorney General, Charles F. C. Ruff, Corporation Counsel of the District of Columbia, and by the Attorneys General for their respective States as follows: Winston Bryant of Arkansas, Richard Blumenthal of Connecticut, Robert A. Butterworth of Florida, Thomas J. Miller of Iowa, A. B. Chandler of Kentucky, Andrew Ketterer of Maine, J. Joseph Curran, Jr., of Maryland, Frank J. Kelley of Michigan, Hubert H. Humphrey III of Minnesota, Mike Moore of Mississippi, Jeffrey R. Howard of New Hampshire, Deborah T. Poritz of New Jersey, Tom Udall of New Mexico, Michael F. Easley of North Carolina, Heidi Heitkamp of North Dakota, Jeffrey B. Pine of Rhode Island, Charles W Burson of Tennessee, Dan Morales of Texas, Jeffrey L. Amestoy of Vermont, Christine Gregoire of Washington, and Darrell V. McGraw, Jr., of West Virginia; for the Bankcard Holders of America by Kennedy P. Richardson; for Consumer Action by James C.

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