On March 1, the U.S. District Court for the District of Colorado issued an order granting a motion filed by the Administrator of the Colorado Uniform Consumer Credit Code (Administrator) against a Colorado-based non-bank and its parent company (defendants) remanding the case to state court. The underlying action alleges that the defendants, among other things, violated Colorado’s statutory limits on excessive finance and delinquency charges. According to the court, the defendants possessed a Colorado supervised lender’s license, which permitted the origination of small installment loans, unsecured loans, and loans secured by personal property or vehicles. Under a lending program agreement between the defendants and a Utah-chartered industrial bank (bank), the bank made loans to consumers who submitted applications through the parent company’s website, and then, within two business days, sold the loans back to the parent company or its affiliates. The parent company bore nearly all of the risks, indemnified the bank against all claims arising from the program, and collected 99 percent of the profits on the loans. The bank’s profits were approximately 1 percent. When the Administrator filed its allegations, the defendants argued that Section 27 of the Federal Deposit Insurance Act (FDIA)—which allows a state bank to charge interest rates permitted in the state where the bank is located on loans made in another state—completely preempted the state usury claims at issue, because the loans were originated by the bank.
However, the Administrator argued that the bank was not the “true lender” of the loans because it did not “bear the predominant economic interest in the loans.” Therefore, the Administrator asserted that FDIA Section 27 did not apply and the case should be remanded for lack of subject matter jurisdiction. The judge granted the Administrator’s motion to remand, holding that “even if the [defendants] have a close relationship with a state or national bank,” the FDIA does not give rise to complete preemption in this case. The judge further explained that, because the Administrator asserted claims against the defendants rather than the bank, and because the relief related to charges the defendants had imposed on loans it purchased from the bank, the claims were not completely preempted by the FDIA.