Interest Rate Exportation Under Attack

The 1978 landmark opinion in Marquette National Bank v. First of Omaha Service Corp (which held that under the National Bank Act, a national bank has the right to export the interest rate authorized by the state where the bank is located to borrowers located elsewhere), the enactment of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”) (which conferred on state-chartered, FDIC-insured banks the same rate exportation powers as national banks), and extraordinary technological advances that have enabled non-banks to partner with banks to offer loans and extensions of credit to customers nationwide (through programs often referred to as bank-model programs or banking as a service (BaaS), and sometimes pejoratively referred to as “rent-a-bank schemes”) have created a robust, competitive smorgasbord of credit products for consumers.

In this webinar, we will describe the nature of these attacks and the defenses being deployed by the industry; discuss who is winning these battles being fought on many fronts; and address what the future may hold in store.

Among other things, we will focus on the following:

• A Brief History of Rate Exportation, and the three primary theories used to attack rate exportation powers
• Opt-Out Pursuant to DIDMCA Section 525 – Current Developments
  • Colorado legislation purporting to opt out of DIDMCA rate exportation, adopted June 2023, to take effect July 1, 2024
  • The proliferation of opt-out laws under consideration in Minnesota, DC, Rhode Island, and Nevada
  • Credit card “carve-outs”
  • Litigation challenging Colorado’s DIDMCA opt-out, including FDIC’s Amicus Brief supporting Colorado Attorney General’s position that all loans made by out-of-state banks to Colorado residents are covered by opt-out and ABA and CBA’s Amicus Brief supporting plaintiffs

• “True Lender” theory, and Recharacterization and “Anti-Evasion” Statutes – Current Developments
  • Increasing enactment of state statutes recharacterizing the “true lender” in bank-nonbank lending programs, and “anti-evasion” statutes
  • State AGs asserting “true lender” theories litigation
  • Arbitration developments in “true lender” 
• Attacks on “Valid When Made” 
  • Madden v. Midland Funding
  • Federal regulator response: Madden-fix (Valid When Made) regulations adopted by OCC and FDIC, and validated by court
• Potential recovery of reasonable attorney’s fees by prevailing industry plaintiffs from states that are determined to violate the constitutional rights of the plaintiffs by enforcing statutes that are barred by the Supremacy and Commerce Clauses
• Possible effects of pending U.S. Supreme Court decisions:
  • Cantero (National Bank Act preemption); Loper Bright and Relentless (Chevron deference)

This program is approved for 1.5 CLE credit in CA, NV, NY, & PA; and 1.8 NJ. MN CLE credit is pending. Uniform Certificates of Attendance will also be provided for the purpose of seeking credit in other jurisdictions.

Login details can be found in the calendar hold and will be resent the day before the webinar. For more information, contact questions@ballardspahr.com.