The Eighth Circuit held that a federally insured Arkansas-chartered bank could, under the Gramm-Leach-Bliley Act (GLBA), charge interest to a Texas resident at the same rate as the Arkansas branch of an Alabama-chartered bank. Jessup v. Pulaski, No. 02-3314, 2003 WL 21000812 (8th Cir. May 5, 2003). A Texas resident argued the 18.5% rate imposed on his card by an Arkansas bank was in violation of Arkansas and Texas usury law. Under a special provision, the GLBA allows federally insured Arkansas banks to charge interest at a rate allowed by the state of any out-of-state bank with a branch office in Arkansas, except when the Arkansas bank has “made” the loan in any state other than Arkansas. The Eighth Circuit found that the loan in question was “made” in Arkansas and so the rate authorized by GLBA could be imposed without regard to the location of the borrower (i.e., “exported”). The court relied on prior OCC letters involving branches to conclude that a loan is “made” for GLBA purposes at the location that approves the loan, extends credit and disburses the funds. In this case, all functions occurred in Arkansas. This case supports the OCC’s analysis for determining where a loan is made, demonstrates courts’ tendency to uphold OCC interpretations and highlights a unique area of federal preemption authority.

    Mike Tomkies and Elizabeth Anstaett