8th Circuit affirms dismissal of challenge to FDIC guidance

Overview of the 8th Circuit Ruling

The 8th U.S. Circuit Court of Appeals recently upheld the dismissal of a lawsuit challenging guidance issued by the Federal Deposit Insurance Corporation (FDIC) regarding non-sufficient funds (NSF) fees. The case involved the Minnesota Bankers Association and Lake Central Bank, who argued that the FDIC’s guidance document, known as Financial Institutions Letter 32-2023 (FIL 32), should have undergone formal notice and comment rulemaking.

Key Points of the Ruling

Dismissal Reasons

• Not Final Agency Action: The court determined that FIL 32 does not constitute a final agency action, which is necessary for judicial review under the Administrative Procedure Act (APA).
• Lack of Standing: The district court found that the banks lacked standing to challenge the guidance, as they could not demonstrate that their alleged injuries would be redressed by the court’s intervention.

Content of FIL 32

• Guidance on NSF Fees: FIL 32 addresses the risks associated with charging multiple NSF fees when a transaction is presented for payment multiple times. It warns financial institutions that such practices may be deemed unfair or deceptive under the Federal Trade Commission Act.
• No Enforcement Actions: The FDIC clarified that it would not initiate enforcement actions based solely on the guidance provided in FIL 32.

Implications

This ruling reinforces the FDIC’s authority to issue guidance without the need for formal rulemaking processes, as long as such guidance does not impose mandatory actions on financial institutions. The decision also highlights the challenges banks face when attempting to contest regulatory guidance in court.