517 U.S. 735116 S.Ct. 1730135 L.Ed.2d 25
SMILEYv.CITIBANK (SOUTH DAKOTA), N. A.Certiorari to the Supreme Court of California.
No. 95-860.
Supreme Court of the United States
Argued April 24, 1996
Decided June 3, 1996

Syllabus*
Petitioner, a resident of California, held credit cards issued by  respondent, a national bank located in South Dakota. She filed suit in  state court, alleging that late-payment fees charged by respondent,  although legal under South Dakota law, violated California law.  Respondent moved for judgment on the pleadings, contending that  petitioner's state law claims were pre-empted by a provision of the  National Bank Act of 1864 that permits a national bank to charge its  loan customers "interest at the rate allowed by the laws of the State  . . . where the bank is located," 12 U. S. C. Section(s) 85, see  Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439  U. S. 299.  The California Superior Court, accepting respondent's  argument that credit card late-payment fees constitute ``interest'' for purposes of Section(s) 85, granted respondent's motion.  The State Court  of Appeal and State Supreme Court affirmed.
Held:  The Comptroller of the Currency has reasonably interpreted the  term ``interest'' in Section(s) 85 to include late-payment fees, see 12  CFR Section(s) 7.4001(a), and petitioner has failed to establish that  the Court should not accord its customary deference to the Comptroller's interpretation of an ambiguous provision of the National Bank Act. Pp.  3-11.
(a) Where a provision of the National Bank Act is ambiguous, the Court,  pursuant to Chevron U. S. A. Inc. v. Natural Resources Defense Council,  Inc., 467 U. S. 837, 842-845, defers to reasonable judgments of the  Comptroller, the official charged with administering the Act.  NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S.  ___, ___. Petitioner's argument that deference is not owing to the recently adopted 12 CFR Section(s) 7.4001(a) is unpersuasive.  The validity of the Comptroller's interpretation is not affected by the fact  that the regulation was issued more than 100 years after Section(s) 85  was enacted or that it was litigation, including this very suit, which  disclosed the need for the regulation.  And the distinction that the  regulation makes between those charges designated as interest and those  not so classified is not arbitrary or capricious.  See Chevron, supra,  at 844.  Petitioner errs in contending that an agency interpretation  that contradicts a prior agency position is necessarily invalid; in any  event, she fails to show that a change of official agency position has occurred here. Finally, the issue here, the meaning of Section(s) 85,  does not bring into play the pre-emption considerations that petitioner  raises.  Pp. 3-8.
(b) The Comptroller's interpretation of the statutory term ``interest''  is reasonable.  There is no indication that, at the time of the passage  of the National Bank Act, common usage of the word ``interest'' or the  phrase ``at the rate allowed'' required that interest charges be  expressed as functions of time and amount owing.  Nor is there support  for petitioner's contention that the late fees are ``penalties'' rather  than ``interest.'' See Citizens' National Bank v. Donnell, 195 U. S.  369.  Pp. 9-11.
11 Cal. 4th 138, 900 P. 2d 690, affirmed.
Justice Scalia delivered the opinion of the Court.


1
Section 30 of the National Bank Act of 1864, Rev. Stat. Section(s) 5197, as amended, 12 U. S. C. Section(s) 85, provides that a  national bank may charge its loan customers "interest at the rate  allowed by the laws of the State . . . where the bank is located."  In  Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439  U. S. 299 (1978), we held that this provision authorizes a national bank  to charge out-of-state credit-card customers an interest rate allowed by  the bank's home State, even when that rate is higher than what is  permitted by the States in which the cardholders reside.  The question  in this case is whether Section(s) 85 also authorizes a national bank to charge late-payment fees that are lawful in the bank's home State but  prohibited in the States where the cardholders reside-in other words,  whether the statutory term "interest" encompasses late-payment fees.

I.

2
Petitioner, a resident of California, held two credit cards-a "Classic Card" and a "Preferred Card"-issued by respondent, a national  bank located in Sioux Falls, South Dakota.  The Classic Card agreement  provided that respondent would charge petitioner a late fee of $15 for  each monthly period in which she failed to make her minimum monthly  payment within 25 days of the due date. Under the Preferred Card  agreement, respondent would impose a late fee of $6 if the minimum  monthly payment was not received within 15 days of its due date; and an  additional charge of $15 or 0.65% of the outstanding balance on the  Preferred Card, whichever was greater, if the minimum payment was not  received by the next minimum monthly payment due date.  Petitioner was charged late fees on both cards.


3
These late fees are permitted by South Dakota law, see S. D. Codified Laws Section(s) 54-3-1, 54-3-1.1 (1990 and Supp. 1995). Petitioner, however, is of the view that exacting such "unconscionable"  late charges from California residents violates California law, and in  1992 brought a class action against respondent on behalf of herself and  other California holders of respondent's credit cards, asserting various  statutory and common-law claims.1  Respondent moved for judgment on  the pleadings, contending that petitioner's claims were pre-empted by Section(s) 85.  The Superior Court of Los Angeles County initially denied respondent's motion, but the California Court of Appeal, Second  Appellate District, issued a writ of mandate directing the Superior  Court to either grant the motion or show cause why it should not be  required to do so.  The Superior Court chose the former course, and the  Court of Appeal affirmed its dismissal of the complaint, 26 Cal. App.  4th 1767, 32 Cal. Rptr. 2d 562 (1994).  The Supreme Court of California  granted review and affirmed, two Justices dissenting.  11 Cal. 4th 138,  900 P. 2d 690 (1995).  We granted certiorari.  516 U. S. ___ (1996).

II.

4
In light of the two dissents from the opinion of the Supreme Court of California, see 11 Cal. 4th, at 165, 177, 900 P. 2d, at 708,  716 (Arabian, J., dissenting, and George, J., dissenting), and in light  of the opinion of the Supreme Court of New Jersey creating the conflict  that has prompted us to take this case,2 it would be difficult indeed  to contend that the word "interest" in the National Bank Act is  unambiguous with regard to the point at issue here.  It is our practice  to defer to the reasonable judgments of agencies with regard to the  meaning of ambiguous terms in statutes that they are charged with  administering.  See Chevron U. S. A. Inc. v. Natural Resources Defense  Council, Inc., 467 U. S. 837, 842-845 (1984).  As we observed only last Term, that practice extends to the judgments of the Comptroller of the  Currency with regard to the meaning of the banking laws. "The  Comptroller of the Currency," we said, "is charged with the enforcement  of banking laws to an extent that warrants the invocation of [the rule  of deference] with respect to his deliberative conclusions as to the  meaning of these laws." NationsBank of N. C., N. A. v. Variable Annuity  Life Ins. Co., 513 U. S. ___, ___ (1995) (slip op., at 4) (citations and internal quotation marks omitted).


5
On March 3, 1995, which was after the California Superior Court's dismissal of petitioner's complaint, the Comptroller of the  Currency noticed for public comment a proposed regulation 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:


6
"The term `interest' as used in 12 U. S. C. Section(s) 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, overlimit 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 Section(s)  7.4001(a)).


7
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 Section(s) 85, and seemingly as a result of this and  similar litigation in which the Comptroller has participated as amicus  curiae 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. Section(s) 553;  Thompson v. Clark, 741 F. 2d 401, 409 (CADC 1984).  That it was  litigation which disclosed the need for the regulation is irrelevant.


8
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 assigned 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 perhaps  even (what Chevron also excludes from deference) "manifestly contrary to  the statute," we will discuss in the next Part of this opinion.


9
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. Section(s) 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.


10
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 Rulemaking asserted that the new  regulation "reflect[s] 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 Section(s) 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. Para(s) 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.


11
In addition to offering these reasons why 12 CFR Section(s) 7.4001(a) in particular is not entitled to deference, petitioner contends that no Comptroller interpretation of Section(s) 85 is entitled  to deference, because Section(s) 85 is a provision that pre-empts 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 Section(s) 85 that will avoid (to the extent possible)  pre-emption of state law.  This argument confuses the question of the  substantive (as opposed to pre-emptive) meaning of a statute with the  question of whether a statute is pre-emptive.  We may assume (without deciding) that the latter question must always be decided de novo by the  courts.  That is not the question at issue here; there is no doubt that  Section(s) 85 pre-empts state law.  In Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U. S. 299 (1978), we  dismissed petitioners' argument that the "exportation" of interest rates  from the bank's home State would "significantly impair the ability of  States to enact effective usury laws" with the observation that "[t]his  impairment . . . has always been implicit in the structure of the  National Bank Act . . . . [T]he protection of state usury laws is an  issue of legislative policy, and any plea to alter Section(s) 85 to further that end is better addressed to the wisdom of Congress than to  the judgment of this Court."  Id., at 318-319.  What is at issue here is  simply the meaning of a provision that does not (like the provision in  Cipollone) deal with pre-emption, and hence does not bring into play the  considerations petitioner raises.3

III.

12
Since we have concluded that the Comptroller's regulation deserves deference, the question before us is not whether it represents  the best interpretation of the statute, but whether it represents a  reasonable one.  The answer is obviously yes.


13
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. Amer. 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").


14
Petitioner suggests another source for the asserted requirement  that the charges be timeand rate-based: What is authorized by Section(s)  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 Bouvier, 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").


15
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 Section(s) 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 Section(s) 85   (or, more precisely, its predecessor, Rev. Stat. Section(s) 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.


16
Petitioner devotes much of her brief to the question whether the  meaning of "interest" in Section(s) 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  Section(s) 85 is not an unreasonable one, the decision of the Supreme  Court of California must be affirmed.


17
It is so ordered.



*
 The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience  of the reader.  See United States v. Detroit Lumber Co., 200 U. S. 321,  337.


1
 By way of common-law claims, petitioner's complaint alleged breach of duty of good faith and fair dealing; unjust enrichment; fraud  and deceit; negligent misrepresentation; and breach of contract.  It  also alleged violation of Cal. Bus. & Prof. Code Ann. Section(s) 17200   (West Supp. 1996) (prohibiting unlawful business practices) and Cal.  Civ. Code Ann. Section(s) 1671 (West 1985) (invalidating unreasonable  liquidated damages).


2
 Sherman v. Citibank (South Dakota), N. A., 143 N. J. 35,  668 A. 2d 1036 (1995).  The Supreme Court of Colorado and the United States Court of Appeals for the First Circuit have adopted the same  interpretation as the Supreme Court of California.  See Copeland v. MBNA  America Bank, N. A., 907 P. 2d 87 (Colo. 1995); Greenwood Trust Co. v.  Massachusetts, 971 F. 2d 818, 829-831 (CA1 1992) (dictum), cert. denied,  506 U. S. 1052 (1993).


3
 In a four-line footnote on the last page of her reply  brief, and unpursued in oral argument, petitioner raised the point that deferring to the regulation in this case involving antecedent transactions would make the regulation retroactive, in violation of  Bowen v. Georgetown Univ. Hospital, 488 U. S. 204, 208-209 (1988).  Reply Brief for Petitioner 20, n. 17.  There might be substance to this  point if the regulation replaced a prior agency interpretation-which, as  we have discussed, it did not.  Where, however, a court is addressing  transactions that occurred at a time when there was no clear agency  guidance, it would be absurd to ignore the agency's current  authoritative pronouncement of what the statute means.


