Banks & Banking – Overdraft Fees – Debit Ordering – High to Low – Contract

Gay v. Peoples Bank (Lawyers Weekly No. 012-106-16, 21 pp.) (Lucy Inman, J.) Appealed from Lincoln County Superior Court (Louis Bledsoe III & Calvin Murphy, JJ.) N.C. App. Unpub.

Holding: Where the defendant-bank’s account agreement documents said the bank would pay “items” in order from the largest item to the smallest item, “items” included debit-card transactions.

We affirm summary judgment for the bank.

The Terms and Conditions Addendum says, “The law permits us to pay items (such as checks or drafts) drawn on your account in any order.” The addendum clearly contemplates a variety of debit transactions, and the parenthetical “(such as checks or draft(s))” following the word “items” is merely illustrative and not exhaustive.

The Electronic Funds Transfers disclosures, Peoples Bank 24 Express & People’s Bank 24 Express Check Terms, Conditions, and Agreements (EFT Agreements) provide in part, “13. When you use the debit card to pay for goods or services at a merchant or POS transaction, you agree:

“a. That such use, whether or not you have signed any sales authorization, will constitute a simultaneous withdrawal from and/or demand from your checking account, even though the transaction may not actually be posted to that account.”

The language “simultaneous withdrawal” in the EFT Agreements does not implicate an instantaneous payment order, considering the additional language in the sentence, “even though the transaction may not actually be posted to that account.” Because the EFT Agreements did not represent that transactions were posted instantaneously, the bank was not obligated to post transactions in real-time chronological order.

Plaintiff’s Aug. 21, 2008 monthly statement showed a balance of $17.60, an expenditure of only $9.23, but an overdraft fee of $32.00. However, the bank presented evidence that its Notice of Insufficient Funds, and not the monthly statement, is the document that reflects a customer’s account balance at the time an overdraft fee is incurred. Because plaintiff failed to present evidence showing the exact date the hold fee was charged, there is no evidence that the bank charged an improper hold fee at a time when plaintiff’s account had a positive balance.

Plaintiff argues the bank breached its duty of good faith and fair dealing when it abused its discretion in order to generate profits by failing to decline transactions in which customers presented a debit card with insufficient funds. However, the account agreement documents gave the bank discretion to pay transactions or to decline them for insufficient funds. Plaintiff offers only speculation that the bank abused its discretion for the purpose of generating profits.

Affirmed.