In King v. Navy Federal Credit Union, — F.4th —-, 2025 WL 2178532 (9th Cir. Aug. 1, 2025), Andrew King, on behalf of a putative class, challenged a $15 returned-check fee imposed by Navy Federal Credit Union (“NFCU”) when a deposited check failed to clear, even though the failure was not his fault. King alleged that the fee violated California’s Unfair Competition Law (UCL) and the federal Consumer Financial Protection Act (CFPA). After removal to federal court, the district court dismissed the California UCL claim, finding it expressly preempted by 12 C.F.R. § 701.35(c), which grants federal credit unions discretion to determine account fees free from state regulation. King appealed.

The Ninth Circuit affirmed, holding that § 701.35(c) explicitly preempts all state laws—general or specific—that regulate the fees charged by federal credit unions. The court emphasized the regulation’s clear language, its history rooted in maintaining the dual chartering system for credit unions, and its deregulatory purpose. King’s arguments that the preemption clause should not apply to generally applicable laws like the California UCL, or that it was inoperative when fees violated federal law, were rejected. The panel concluded that allowing state laws to govern such fee practices would undermine federal oversight and the member-governance model of federal credit unions.

No information in this communication is intended to constitute specific legal advice.  For specific legal advice, please contact an attorney, and if you have any such questions or would like more information about this issue, please contact William “Pat” Huttenbach at 713.752.8616, or email at phuttenbach@craincaton.com.

Thanks,

Pat

William “Pat” Huttenbach | Shareholder | Banking Litigation
Crain Caton & James | Attorneys & Counselors
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King v Navy Federal Credit Union