Banks & Banking — Overdraft Fees – Debit Posting Order – Contract

Gay v. Peoples Bank (Lawyers Weekly No. 15-15-0641, 21 pp.) (Louise Bledsoe III, J.) 2015 NCBCD 59

Holding: An addendum to the defendant-bank’s checking account agreement clearly indicated that the bank would pay the largest debit item first each day, noting that this payment policy might increase overdraft or insufficient-fund fees a customer would pay. The bank did not breach its contract with the plaintiff-customer by following the policy laid out in the addendum.

The court grants summary judgment for the bank.

The fact that the account agreement documents do not expressly state that an “item” includes an “electronic debit transaction” does not create ambiguity where, as here, the plain meaning of the term can be discerned by reference to the relevant documents.

The language describing the payment priority of electronic debit transactions in the account agreement documents is unambiguous and clearly discloses the bank’s policy to pay electronic transactions before checks, with high-to-low posting, and to permit the assessment of an overdraft fee for debit transactions drawn on insufficient funds. Given that the evidence is undisputed that the bank followed this policy during the relevant time period, the court concludes that plaintiff’s breach of contract claim on this ground should be dismissed.

The undisputed evidence shows that the bank did not have an obligation to post debits to customers’ accounts chronologically or immediately at the time of purchase under the account agreement documents.

Although plaintiff suggests that the bank reordered transactions to assess excessive overdraft fees, it is undisputed that the “delayed” charges plaintiff identifies resulted from the bank not receiving a vendor’s request for payment until a day or two after the point-of-sale transactions, not because of an attempt to reorder the transactions to create an opportunity to assess fees when no fees could be properly charged. Plaintiff has failed to show any evidence that the bank posted debits before credits or charged an overdraft fee on a positive account balance.

Plaintiff argues that the bank should have refused to pay insufficient funds (NSF) items and thereby prevented plaintiff’s account from becoming overdrawn and subject to overdraft fees. However, the account agreement documents gave the bank the sole discretion to pay or to return items in the event of an overdraft. Furthermore, plaintiff was notified of the procedure to remove the overdraft protection from his account – which would have prevented those items from being paid by the bank – yet he never exercised this option.

Summary judgment for the bank.