On April 8, 2024, a Minnesota federal district court dismissed without prejudice the complaint filed by the Minnesota Bankers Association and Lake Central Bank (Plaintiffs) against the Federal Deposit Insurance Corporation (FDIC) challenging the FDIC’s guidance on non-sufficient funds (NSF) fees.

Plaintiffs filed their complaint in July 2023 seeking declaratory and injunctive relief under the Administrative Procedures Act (APA) against defendants FDIC and Chairman Martin J. Gruenberg. FDIC Financial Institutions Letter 40-2022: Supervisory Guidance on Multiple Re-Presentment NSF Fees (“FIL 40”) prohibits FDIC supervised banks from charging multiple NSF fees for the same item.  The complaint alleges that FIL 40 is a legislative rule promulgated without adherence to the APA’s notice and comment rulemaking procedures, resulting in arbitrary and capricious agency action, and that the FDIC exceeded its statutory authority.

In September 2023, the FDIC filed a motion to dismiss the lawsuit.  In its motion to dismiss, the FDIC asserts that the lawsuit should be dismissed because Plaintiffs asked the court to invalidate FIL 40 even though Financial Institutions Letter 32-2023: FDIC Clarifying Supervisory Approach Regarding Supervisory Guidance on Multiple Re-Presentment NSF Fees (“FIL 32”) replaced FIL 40 and FIL 32 is the operative guidance document.  In support of its motion to dismiss, the FDIC argues that Plaintiffs lack standing, FIL 32 is not a final agency action imposing legal consequences, and the relief sought would not redress any injury.  In the Plaintiffs’ memorandum in opposition to the FDIC’s motion to dismiss, Plaintiffs argue that their amended complaint pleads plausible APA claims that are ripe for review, they have standing to sue, and the court should vacate FIL 32.

In granting the FDIC’s motion to dismiss, the court found that:

• Plaintiffs lack standing because they cannot establish that their alleged injury will be redressed by the requested relief.  The court noted that Plaintiffs “remain obligated to not engage in deceptive and unfair practices and acts” under Section 5 of the FTC Act” and “[r]escinding FIL32 will have no impact on Plaintiffs’ statutory obligations.”
• “Plaintiffs only have a ‘redressable concrete interest’ if FIL 32 is a final rule to which the APA applies.” FIL 32 is not a final rule under the APA as no legal consequences flow from it.  “[T]he FDIC will not institute any enforcement actions based on FIL 32, but rather will take action for violations of an institution’s statutory obligations.”

The court declined to rule on Count II (Arbitrary and Capricious Agency Action) and Count IV (Agency Action Contrary to Law) of the complaint because it already found that Plaintiffs lacked standing.

Plaintiffs have not issued a press release on the ruling.  We will continue to monitor the case to see if Plaintiffs appeal the dismissal.

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