Smiley v. Citibank (South Dakota), N. A.

lation dealing with the subject before us, see 60 Fed. Reg. 11924 , 11940, and on February 9, 1996, which was after the California Supreme Court’s decision, he adopted the following provision:

“The term ‘interest’ as used in 12 U. S. C. § 85 includes any payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended. It includes, among other things, the following fees connected with credit extension or availability: numerical periodic rates, late fees, not sufficient funds (NSF) fees, over limit fees, annual fees, cash advance fees, and membership fees. It does not ordinarily include appraisal fees, premiums and commissions attributable to insurance guaranteeing repayment of any extension of credit, finders’ fees, fees for document preparation or notarization, or fees incurred to obtain credit reports.” 61 Fed. Reg. 4869 (to be codified in 12 CFR § 7.4001 (a)).

Petitioner proposes several reasons why the ordinary rule of deference should not apply to this regulation. First, petitioner points to the fact that this regulation was issued more than 100 years after the enactment of § 85, and seemingly as a result of this and similar litigation in which the Comptroller has participated as amicus curia# on the side of the banks. The 100-year delay makes no difference. To be sure, agency interpretations that are of long standing come before us with a certain credential of reasonableness, since it is rare that error would long persist. But neither antiquity nor contemporaneity with the statute is a condition of validity. We accord deference to agencies under Chevron, not because of a presumption that they drafted the provisions in question, or were present at the hearings, or spoke to the principal sponsors; but rather because of a presumption that Congress, when it left ambiguity in a statute meant

for implementation by an agency, understood that the ambiguity would be resolved, first and foremost, by the agency, and desired the agency (rather than the courts) to possess whatever degree of discretion the ambiguity allows. See Chevron, supra, at 843-844. Nor does it matter that the regulation was prompted by litigation, including this very suit. Of course we deny deference “to agency litigating positions that are wholly unsupported by regulations, rulings, or administrative practice,” Bowen v. Georgetown Univ. Hospital, 488 U. S. 204 , 212 (1988). The deliberateness of such positions, if not indeed their authoritativeness, is suspect. But we have before us here a full-dress regulation, issued by the Comptroller himself and adopted pursuant to the notice-and-comment procedures of the Administrative Procedure Act designed to assure due deliberation, see 5 U. S. C. § 553 ; Thompson v. Clark, 741 F. 2d 401 , 409 (CADC 1984). That it was litigation which disclosed the need for the regulation is irrelevant.

Second, petitioner contends that the Comptroller’s regulation is not deserving of our deference because “there is no rational basis for distinguishing the various charges [it] has denominated interest. . . from those charges it has denominated ‘non-interest.’” Reply Brief for Petitioner 14. We disagree. As an analytical matter, it seems to us perfectly possible to draw a line, as the regulation does, between (1) “payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended,” and (2) all other payments. To be sure, in the broadest sense all payments connected in any way with the loan — including reimbursement of the lender’s costs in processing the application, insuring the loan, and appraising the collateral — can be regarded as “compensating [the] creditor for [the] extension of credit.” But it seems to us quite possible and rational to distinguish, as the regulation does, between those charges that are specifically as

signed, to such expenses and those that are assessed for simply making the loan, or for the borrower’s default. In its logic, at least, the line is not “arbitrary [or] capricious,” and thereby disentitled to deference under Chevron, see 467 U. S., at 844 . Whether it is “arbitrary [or] capricious” as an interpretation of what the statute means — or perháps even (what Chevron also excludes from deference) “manifestly contrary to the statute” — we will discuss in the next Part of this opinion.

Finally, petitioner argues that the regulation is not entitled to deference- because it is inconsistent with positions taken by the Comptroller in the past. Of course the mere fact that an agency interpretation contradicts a prior agency position is not fatal. Sudden and unexplained change, see, e. g., Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29 , 46-57 (1983), or change that does not take account of legitimate reliance on prior interpretation, see, e. g., United States v. Pennsylvania Industrial Chemical Corp., 411 U. S. 655 , 670-675 (1973); NLRB v. Bell Aerospace Co., 416 U. S. 267 , 295 (1974), may be “arbitrary, capricious [or] an abuse of discretion,” 5 U. S. C. § 706 (2)(A). But if these pitfalls are avoided, change is not invalidating, since the whole point of Chevron is to leave the discretion provided by the ambiguities of a statute with the implementing agency.

In any case, we do not think that anything which can accurately be described as a change of official agency position has occurred here. The agency’s Notice of Proposed Rule-making asserted that the new regulation “reflects] current law and [Office of the Comptroller of the Currency (OCC)] interpretive letters,” 60 Fed. Reg. 11929 (1995), and the Statement of Basis and Purpose accompanying the final adoption stated that “[t]he final ruling is consistent with OCC interpretive letters in this area . . . and reflects the position the OCC has taken in amicus curiae briefs in litigation pending in many state and Federal courts,” 61 Fed. Reg.

4859 (1996) (citing OCC interpretive letters). Petitioner points only to (1) a June 1964 letter from the Comptroller to the President’s Committee on Consumer Interests, which states that “[c]harges for late payments, credit life insurance, recording fees, documentary stamp are illustrations of charges which are made by some banks which would not properly be characterized as interest,” see App. to Brief for Petitioner 5a; and (2) a 1988 opinion letter from the Deputy Chief Counsel of the OCC stating “it is my position that [under §85] the laws of the states where the banks are located . . . determine whether or not the banks can impose the foregoing fees and charges [including late fees] on Iowa residents,” OCC Interpretive Letter No. 452, reprinted in 1988-1989 Transfer Binder, CCH Fed. Banking L. Rep. ¶ 85,676, p. 78,064 (1988). We doubt whether either of these statements was sufficient in and of itself to establish a binding agency policy — the former, because it was too informal, and the latter because it only purported to represent the position of the Deputy Chief Counsel in response to an inquiry concerning particular banks. Nor can it even be argued that the two statements reflect a prior agency policy, since, in addition to contradicting the regulation before us here, they also contradict one another — the former asserting that “interest” is a nationally uniform concept, and the latter that it is to be determined by reference to state law. What these statements show, if anything, is that there was good reason for the Comptroller to promulgate the new regulation, in order to eliminate uncertainty and confusion.

In addition to offering these reasons why 12 CFR § 7.4001 (a) in particular is not entitled to deference, petitioner contends that no Comptroller interpretation of § 85 is entitled to deference, because §85 is a provision that preempts state law. She argues that the “presumption against . . . pre-emption” announced in Cipollone v. Liggett Group, Inc., 505 U. S. 504 , 518 (1992), in effect trumps Chevron, and requires a court to make its own interpretation of § 85 that

whether it represents a reasonable one. The answer is obviously yes.

Petitioner argues that the late fees charged by respondent do. not constitute “interest” because they “do not vary based on the payment owed or the time period of delay.” Brief for Petitioner 32-33. We do not think that such a limitation must be read into the statutory term. Most legal dictionaries of the era of the National Bank Act did not place such a limitation upon “interest.” See, e. g., 1 J. Bouvier, A Law Dictionary 652 (6th ed. 1856) (“The compensation which is paid by the borrower to the lender or by the debtor to the creditor for... use [of money]”); 2 A. Burrill, A Law Dictionary and Glossary 90 (2d ed. 1860); 11 American and English Encyclopedia of Law 379 (J. Merrill ed. 1890). But see J. Wharton, Law Lexicon or Dictionary of Jurisprudence 391 (2d Am. ed. 1860). The definition of “interest” that we ourselves set out in Brown v. Hiatts, 15 Wall. 177 , 185 (1873), decided shortly after the enactment of the National Bank Act, likewise contained no indication that it was limited to charges expressed as a function of time or of amount owing: “Interest is the compensation allowed by law, or fixed by the parties, for the use or forbearance of money or as damages for its detention.” See also Hollowell v. Southern Building & Loan Assn., 120 N. C. 286 , 26 S. E. 781 (1897) (“[A]ny charges made against [the borrower] in excess of the lawful rate of interest, whether called ‘fines,’ ‘charges,’ ‘dues,’ or ‘interest,’ are in fact interest, and usurious”).

Petitioner suggests another source for the asserted requirement that the charges be time- and rate-based: What is authorized by § 85, she notes, is the charging of interest “at the rate allowed” by the laws of the bank’s home State. This requires, in her view, that the interest charges be expressed as functions of time and amount owing. It would be surprising to find such a requirement in the Act, if only because it would be so pointless. Any flat charge may, of course, readily be converted to a percentage charge — which

was indeed the basis for 19th-century decisions holding that flat charges violated state usury laws establishing maximum “rates.” See, e. g., Craig v. Pleiss, 26 Pa. 271 , 272-273 (1856); Hollowell, supra, at 286, 26 S. E., at 781 . And there is no apparent reason why home-state-approved percentage charges should be permissible but home-state-approved flat charges unlawful. In any event, common usage at the time of the National Bank Act prevents the conclusion that the Comptroller’s refusal to give the word “rate” the narrow meaning petitioner demands is unreasonable. The 1849 edition of Webster’s gives as one of the definitions of “rate” the “[p]rice or amount stated or fixed on any thing.” N. Webster, American Dictionary of the English Language 910. To illustrate this sense of the word, it provides the following examples: “A king may purchase territory at too dear a rate. The rate of interest is prescribed by law.” Ibid. Cf. 2 Bou-vier, supra, at 421 (defining “rate of exchange” as “the price at which a bill drawn in one country upon another, may be sold in the former”).

Finally, petitioner contends that the late fees cannot be “interest” because they are “penalties.” To support that dichotomy, she points to our opinion in Meilink v. Unemployment Reserves Comm’n of Cal., 314 U. S. 564 , 570 (1942). But Meilink involved a provision of the Bankruptcy Act that disallowed debts owing to governmental entities “as a penalty,” except for “the amount of the pecuniary loss sustained by the act. . . out of which the penalty . . . arose, with . . . such interest as may have accrued thereon according to law.” Id., at 566 . Obviously, this provision uses “interest” to mean only that interest which is exacted as commercial compensation, and not that interest which is exacted as a penalty. A word often takes on a more narrow connotation when it is expressly opposed to another word: “car,” for example, has a broader meaning by itself than it does in a passage speaking of “cars and taxis.” In §85, the term “interest” is not used in contradistinction to “penalty,” and

there is no reason why it cannot include interest charges imposed for that purpose. More relevant than Meilink, is our opinion in Citizens’ Nat. Bank of Kansas City v. Donnell, 195 U. S. 369 (1904), which did involve §85 (or, more precisely, its predecessor, Rev. Stat. § 5197). There, a bank argued that a 12% charge on overdrafts did not violate a state law setting an 8% ceiling on interest rates because, inter alia, the overdraft charge “was a penalty because of a failure to pay a debt when due.” Id., at 373-374 . We dismissed the argument out of hand: “The suggestions as to the twelve per cent charge on overdrafts do not seem to us to need answer.” Id., at 374 .

* * *

Petitioner devotes much of her brief to the question whether the meaning of “interest” in § 85 can constitutionally be left to be defined by the law of the bank’s home State — a question that is not implicated by the Comptroller’s regulation. Because the regulation is entitled to deference, and because the Comptroller’s interpretation of §85 is not an unreasonable one, the decision of the Supreme Court of California must be affirmed.

It is so ordered.