Maryland Legal Alert for Financial Services
Ninth Circuit Decision on NCUA Preemption of State Laws Regulating Account Fees
On August 1, 2025, the United States Court of Appeals for the Ninth Circuit issued a decision, affirming the dismissal of a putative class action brought under California’s Unfair Competition Law (“UCL”). In the case, the plaintiff alleged that the credit union violated state law by charging a $15 returned-check fee even though the check deposit failure was not attributable to the member’s conduct. The Ninth Circuit held that the claim was expressly preempted by 12 C.F.R. § 701.35(c), which authorizes a federal credit union’s board of directors to determine the types of fees or charges associated with the maintenance of member accounts, consistent with federal law.
The court’s opinion makes clear that this preemption provision applies broadly to all state laws that would regulate account fees, whether those laws are directed specifically at regulation of deposit products or are generally applicable consumer protection statutes such as the UCL. The court rejected the plaintiff’s argument that a generally applicable law falls outside the preemptive scope of § 701.35(c), reasoning that such an interpretation would permit states to regulate federal credit union fees indirectly through broad consumer protection laws. The court further emphasized that the preemption clause and the requirement that fees be “consistent with federal law” are independent; thus, even if a fee were inconsistent with federal law, that would not remove the bar on state regulation.
This decision reinforces the protections afforded to federal credit unions under the National Credit Union Administration's (NCUA) regulatory framework and effectively narrows the practical effect of the “consumer protection” carve-out in NCUA preemption guidance.
For more information, contact Tamia J. Morris.