The Eleventh Circuit Court of Appeals affirmed the district court decision denying a preliminary injunction to bar enforcement of the Georgia Payday Lending statute. Bankwest, Inc. v. Baker, 2005 WL 1367795 (11th Cir. June 10, 2005). The action was brought by out-of-state federally insured banks to prevent enforcement of the provisions of the Georgia Payday Loan law that restricts a payday loan store from acting as an agent for an out-of-state bank when the agreement grants the in-state agent “the predominate economic interest” in the bank’s payday loan.

    The court declined to give Chevron deference to the Federal Deposit Insurance Corporation position stating that Chevron deference is not warranted for “opinion letters, policy statements, manuals and the like.” The court distinguished the broad federal preemption authority of national banks based on the National Bank Act with the narrow authority of state banks. The court found no field preemption in Section 27(a) of the Federal Deposit Insurance Act, 12 U.S.C. § 1831d(a) and no conflict preemption between the Georgia law and Section 27(a). While the court found express preemption in Section 27, the court found that the scope of express preemption did not extend so far as to preempt various provisions of the Georgia law. The court concluded that the portion of the law that voids an out-of-state bank’s loan procured by an in-state agent under a prohibited agency agreement is not preempted.

    The court described the Georgia law as nothing more than a narrow agency limitation on contracts between in-state payday stores and out-of-state banks. The court saw no reason to preclude Georgia from punishing violations of its agency rule in the manner the state selected because the violation depends upon the existence of a prohibited agency agreement and does not occur if the payday store does not have the predominate economic interest in the payday loan. The dissenting opinion argued that Section 27 does expressly preempt the Georgia law.

    The decision has ramifications beyond payday lending because the same arguments could apply to other lending through agents/brokers, such as auto lending through dealers, private label credit card lending through retail store clerks and mortgage lending through brokers. The decision may encourage other states to enact similar laws applicable to non-bank agents.

    􀂗 Mike Tomkies and Elizabeth Anstaett