Multiple national banks challenged a state’s opt-out from the Federal Interest Rate Preemption under 12 U.S.C. § 1831d. The state’s law limits the interest rates charged on loans that are "made in" the state. While this limit imposed by the state is statutorily allowed, the definition of “made” is unclear. The state considers loans to be “made” in the state if a loan is made to a resident of the state instead of the traditional understanding that focuses on where the originating bank is located. The banks argued that the state’s interpretation exceeded its statutory authority and sought a preliminary injunction to prevent the state from enforcing these limits against out-of-state lenders. The court must determine the meaning of the word “made” in the statute before considering the injunction.
In National Ass’n of Industrial Bankers v. Weiser, No. 1:24-cv-00812-DDD-KAS, 2024 WL 3169735, 2024 U.S. Dist. LEXIS 114890 (D. Co. June 18, 2024) (opinion not yet released for publication) the court ruled that loans are only considered to be “made” when originated by a bank. The court's analysis focused on the plain meaning of the statutory language in 12 U.S.C. § 1831d and the broader context of federal banking laws. It emphasized that the statute uses the term "made" to describe the lender's act of creating a loan rather than the borrower's act of receiving it. The court found that Congress consistently used "make" and "made" throughout Title 12 to refer to actions by lenders, while borrowers are described as "receiving" or "obtaining" loans. The court reasoned that if Congress intended to focus on the borrower's location, it could have explicitly stated that loans "made to borrowers in" a state were subject to state caps. It concluded that the proper determination of where a loan is "made" hinges on the location where the lender performs key loan-making functions, such as loan approval and disbursement, rather than the borrower's residence.
By Maycee Redfearn: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]