## Facts

- Barbara Smiley, a California resident, held two Citibank credit cards issued by Citibank (South Dakota), N.A., a national bank located in South Dakota.
- The card agreements imposed fixed late-payment fees (e.g., $15) when minimum payments were not timely received.
- South Dakota law permitted the late fees charged by Citibank.
- Smiley sued under California statutes and common law, alleging the late fees were unlawful and unconscionable under California law.
- Citibank asserted that the National Bank Act (NBA), 12 U.S.C. § 85, allowed it to charge “interest” permitted by the state where the bank is located, preempting contrary California law.
- California courts dismissed Smiley’s claims, concluding late fees qualify as “interest” under § 85.
- During the dispute, the Office of the Comptroller of the Currency (OCC) adopted 12 C.F.R. § 7.4001(a), defining “interest” to include, among other charges, credit card late fees.

## Issues

1. Whether “interest” in 12 U.S.C. § 85 includes credit card late-payment fees imposed by a national bank.
2. Whether the OCC’s regulation defining “interest” to include late fees is entitled to deference, making the home-state rule in § 85 controlling over conflicting cardholder-state limits.

## Decision

- The Supreme Court unanimously affirmed the judgment for Citibank.
- The Court held that “interest” in § 85 is ambiguous as to whether it includes late-payment fees.
- The Court upheld the OCC’s interpretation in 12 C.F.R. § 7.4001(a) as a reasonable construction of § 85.
- Applying Chevron, the Court deferred to the OCC’s reasonable interpretation.
- Because late fees qualify as “interest” under § 85, a national bank may charge late fees allowed by the law of the state where the bank is located, notwithstanding more restrictive laws of the borrower’s state.

## Legal Principles

- When a statutory term in the National Bank Act is ambiguous and the administering agency issues a reasonable interpretation, courts defer under Chevron.
- For purposes of 12 U.S.C. § 85, the OCC may define “interest” to include non-percentage credit charges such as late-payment fees and similar credit card charges.
- Once a charge is treated as “interest” under § 85, the national bank may apply the interest rules of its home state, and contrary state-law restrictions on that charge are displaced.

## Conclusion

The Court held that the OCC reasonably construed “interest” in NBA § 85 to include credit card late-payment fees, so a national bank may impose late fees allowed by its home-state law and conflicting cardholder-state restrictions cannot be applied to bar those fees.


Smiley v. Citibank (S.D.), N.A., 517 U.S. 735 (1996)