Davis v. Pacific Capital Bank, N.A. (Business and Corporations Law)

Filed December 29, 2008

Ninth Circuit Court of Appeal

Cite as 07-56236

Clients’ Unfair Competition Claim Against Creditor Dismissed

Felicia Davis (“Davis”) and others charged Pacific Capital Bank, N.A., (“Pacific”) under California’s Unfair Competition Law, Cal. Bus. and Professional Code section 17200. Davis alleged she obtained a “Refund Anticipation Loan” (“RAL”) secured by her anticipated federal income tax refund, which Davis authorized the Internal Revenue Service to deposit into an account established by Pacific.

The loan document, attached to Davis’s complaint, provided that $1,115 was credited to Davis, the credit would cost $85, the Annual Percentage Rate “cost of [the] credit at a yearly rate” was 57.969%, and that one payment of $1,200 would be due forty-eight days after Pacific approved the loan.

The loan document provided that, if Davis repaid the loan early, she would not be entitled to a refund of any part of the $85 finance charge, but the loan document did not require Davis to pay any additional finance charges if she repaid the loan after the anticipated forty-eight day period.

Davis alleges her refund was deposited ten days earlier than anticipated in the loan agreement, and, as a consequence, Pacific’s failure to refund a $17.74 pro-rated portion of her finance charge was “unlawful” or “unfair” because § 1615 requires Pacific to refund unearned “interest.”

The district court dismissed Davis’s complaint with prejudice, holding that the $85 finance charge was not interest.

The court held that section 1615 does not “require Pacific to refund a portion of the $85 finance charge at issue”. It held that Pacific’s decision to follow TILA and describe the “cost of [the] credit as a yearly rate” does not create a triable issue of fact regarding whether the finance charge may be “interest.” The proper interpretation of “interest” in section 1615 is a question of law.

Further, the court found no violations under California’s Unfair Competition Law, which “permits violations of other laws to be treated as unfair competition that is independently actionable.” (Leonel v. Am. Airlines, Inc., 400 F.3d 702, 714 (9th Cir. 2005) (citations omitted). It also concluded that Pacific retained no interest under section 1615, nor finds any violation of federal law to form the basis of Davis’s single Unfair Competition Law claim.

The Ninth Circuit court of appeal therefore affirmed the decision of the trial court and recommended dismissal of the case.