Minnesota Bankers Association v. Federal Deposit Insurance Corporation

Background

Minnesota Bankers Association represents commercial banks, trust companies, and savings associations with an official branch in Minnesota. Lake Central Bank is a Minnesota state-chartered commercial bank and a member of the Association. The plaintiffs challenged Financial Institution Letter 32, or FIL 32, issued by the Federal Deposit Insurance Corporation (FDIC) in June 2023.

FIL 32 addressed multiple insufficient-funds fees charged for the same transaction, such as when a merchant attempts more than once to cash a check that the customer cannot cover. The FDIC warned that, depending on the facts, inadequate disclosures about these fees could mislead customers and that repeated fees imposed without enough notice or an opportunity to avoid them could be unfair. FIL 32 encouraged financial institutions to review their practices and disclosures and described possible ways to reduce risk.

The plaintiffs brought four claims under the Administrative Procedure Act (APA), the federal law governing review of certain agency actions. Count I alleged that the FDIC issued FIL 32 without the APA’s required notice-and-comment process. Count II alleged that the FDIC acted arbitrarily and capriciously. Count III alleged that the FDIC exceeded its authority by attempting to define unfair or deceptive practices under the Federal Trade Commission Act. Count IV alleged that the FDIC violated its own regulations by issuing FIL 32 because those regulations prohibit enforcement actions based on supervisory guidance. The plaintiffs sought a declaration that FIL 32 was invalid and a permanent injunction against its enforcement.

Standing and Final Agency Action

The FDIC argued that the plaintiffs lacked standing, meaning they had not shown a legally sufficient injury that the court could likely remedy. The court focused on redressability, which asks whether the requested relief would likely fix the claimed injury.

The court held that FIL 32 was not “final agency action” reviewable under the APA. Final agency action generally must complete the agency’s decision-making process and determine rights or obligations or create legal consequences. The FDIC’s policies stated that supervisory guidance did not have the force or effect of law and instead described supervisory expectations or priorities.

The court found that the FDIC would not bring enforcement actions based on FIL 32 itself. Instead, any action would be based on violations of the institutions’ existing statutory obligations. FIL 32 also did not state that charging multiple fees necessarily violated the Federal Trade Commission Act; it identified circumstances in which the practice, combined with inadequate disclosure, could violate that law. The plaintiffs could not identify an FDIC examination or decision that treated FIL 32 as binding.

Because FIL 32 was not a final rule to which the APA applied, the court concluded that the plaintiffs had not shown that their requested relief would redress their alleged procedural injury. The plaintiffs therefore lacked standing.

Other Issues and Disposition

The FDIC also argued that the challenge was not ripe, meaning that the dispute was not sufficiently developed for judicial decision, and that FIL 32 was not arbitrary and capricious and did not exceed the FDIC’s authority. The court stated that deciding those issues was unnecessary because the plaintiffs lacked standing.

Judge Paul A. Magnuson granted the FDIC’s Motion to Dismiss. The court dismissed the Amended Complaint without prejudice. The opinion did not decide the plaintiffs’ substantive challenges to FIL 32.