Wells Fargo Bank of Texas, et al. v. James

The Fifth Circuit U.S. Court of Appeals held that the National Bank Act preempted a state law that prohibited a national bank from charging a fee for cashing an on-us check for a payee who no account at the bank.

The Plaintiffs in the case were five national banks that do business in the state of Texas and the defendant was the Texas State Banking Commissioner. The Texas Legislature enacted a par value statute that provided "a payor bank shall pay a check drawn on it against a sufficient balance at par, without regard to whether the payee holds an account at the bank". The Plaintiffs contended the statute was preempted by the National Bank Act and 12 C.F.R. 7.4002(a) which provides that a national bank may "charge its customers non-interest charges and fees". The OCC has interpreted the word "customer" to include any person who presents a check for payment and issued identical opinion letters to three of Plaintiffs that they were authorized to charge a checking-cashing fee to non-account holders.

The Plaintiffs initiated this action seeking a permanent injunction and a declaration that the statute was null and void. The district court issued a permanent injunction, found the statute was preempted by the National Bank Act, and declared it null and void. The Defendant appealed.

The Court noted a state statute may regulate national banks, where doing so does not prevent or significantly interfere with the national bank's exercise of its powers. When a state statute interferes with a power which national banks are authorized to exercise, the state statute irreconcilably conflicts with federal law and is preempted by the Supremacy Clause of the U.S. Constitution.

The Court held that the OCC interpretation of the word "customer" was controlling and included payees who presented checks for payment. In addition, 12 C.F.R. 7.4002(a) authorized a national bank to charge non-account holding payees a check cashing fee. The state law, which prohibited such a fee, was in irreconcilable conflict with the federal regulatory scheme and was preempted.

The decision of the district court was affirmed.