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Davis v. Pacific Capital Bank

December 24, 2008

FELICIA D. DAVIS, FOR HERSELF AND FOR ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
PACIFIC CAPITAL BANK, N. A., DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Central District of California D.C. No. CV-07-02786-R Manuel L. Real, District Judge, Presiding.

The opinion of the court was delivered by: Hawkins, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted November 17, 2008 -- Pasadena, California.

Before: Myron H. Bright,*fn1 Stephen S. Trott, and Michael Daly Hawkins, Circuit Judges.

Opinion by Judge Hawkins

OPINION

Must a creditor who imposes a flat finance charge that does not vary with the term of a Refund Anticipation Loan refund a portion of the charge as "unearned interest" under 15 U.S.C. §1615 when the loan is repaid earlier than anticipated in the loan agreement? Concluding that the finance charge in question is not an "interest" charge, we answer no and affirm.*fn2

FACTUAL AND PROCEDURAL BACKGROUND

Felicia Davis ("Davis") brought this action for herself and others similarly situated against Pacific Capital Bank, N.A., ("Pacific") under California's Unfair Competition Law, Cal. Bus. & Prof. Code §17200. Davis alleges she obtained a "Re-fund 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 as an exhibit 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.

JURISDICTION AND STANDARD OF REVIEW

We have appellate jurisdiction pursuant to 28 U.S.C. § 1291. We review dismissals for failure to state a claim de novo. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).

DISCUSSION

[1] Section 1615 states that "[i]f a consumer prepays in full the financed amount under any consumer credit transaction, the creditor shall promptly refund any unearned portion of the interest charge to the consumer." 15 U.S.C. § 1615(a)(1). Because Congress did not define the word "interest" as used in § 1615, ...


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