The United Stated District Court for the District of Colorado recently remanded an action to state court and held that a defendant-lender’s defenses under the Federal Deposit Insurance Act (“FDIA”) do not completely preempt plaintiff’s claims because the FDIA defenses do not apply to non-bank entities and, accordingly, the Court lacked subject matter jurisdiction. See Meade v. Marlette Funding KKC d/b/a Best Egg, 2018 WL 1417706 (D. Colo. Mar. 21, 2018). Defendant is a Colorado supervised lender that markets loans to Colorado consumers. However, the loans are made by a New Jersey bank, who then sells 90% of the loans to defendant or its designees within two days. Plaintiff, Colorado’s Administrator of its Uniform Consumer Credit Code, brought the action against defendant alleging, among other things, that defendant had been charging excessive fees. Defendant removed the action, claiming that the FDIA completely preempts plaintiff’s claims and that the Court thus has subject matter jurisdiction. 12 U.S.C. §1831d. Plaintiff then filed a motion to remand, arguing that complete preemption does not apply because defendant is not a bank.
The Court granted plaintiff’s motion and remanded the action. First, the Court agreed with defendant that, “[o]utside of a few narrow exceptions, a claim that is stated in terms of state law ‘may be removed to federal court in only two circumstances – when Congress expressly so provides . . . or when a federal statute wholly displaces the state-law cause of action through complete pre-emption.” Second, the Court agreed that, although the Supreme Court has determined that the National Bank Act completely preempts state causes of action in certain circumstances, courts are split on whether this applies to the FDIA in cases involving banks. Nonetheless, defendant here is a “supervised lender” and not a bank, and courts have found that preemption does not apply for such claims against non-banks, “‘even if the non-bank defendant has a close relationship with a state or national bank.’” The Court further rejected defendant’s argument that the FDIA completely preempts plaintiff’s claims because the loans to which the alleged overcharges and improper fees relate were made by a bank. Instead, the Court held that defendant was the “true lender,” regardless of who originated the loan.