Background
In 2008, Fifth Third Bank launched an Early Access program allowing customers to advance money into their checking accounts in exchange for a 10 percent transaction fee. The bank disclosed this fee and stated it equated to a 120 percent annual percentage rate. However, because the loans were repaid upon the next deposit, the actual annual percentage rate varied significantly, often exceeding 120 percent. William Klopfenstein sued on behalf of a class, alleging breach of contract and violations of the Truth in Lending Act. A jury found that the bank breached the contract but applied the voluntary-payment defense to bar recovery, concluding the class paid with full knowledge of the relevant facts.
The court’s reasoning
The Sixth Circuit explained that Ohio law on the voluntary-payment defense lacks controlling precedent for modern standardized contracts of adhesion containing conflicting price terms. The court noted that while the defense generally bars recovery for mistakes of law, it permits recovery for mistakes of fact. However, Ohio courts have not clearly distinguished whether a misunderstanding of a contract’s price formula constitutes a mistake of fact or law. Consequently, the Sixth Circuit declined to speculate on how the Supreme Court of Ohio would resolve this issue.
What it means going forward
The ruling pauses the class action’s progress on the breach of contract claim until the Supreme Court of Ohio clarifies the scope of the voluntary-payment defense. The decision preserves the bank’s ability to assert the defense pending state court guidance while allowing the separate Truth in Lending Act appeal to proceed.
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