FDIC Withdraws Amicus Brief in Appeal Over Interest Rate Cap on State-Bank Lenders Located Outside Colorado

On February 24, the FDIC filed a notice that, after the change in presidential administration, it is withdrawing its amicus brief that had urged the U.S. Court of Appeals for the Tenth Circuit to overturn a preliminary injunction blocking Colorado from enforcing its statutory interest rate cap on loans made by state-chartered banks that are not located in Colorado to borrowers who are located in Colorado.

The appeal stemmed from a lawsuit filed by trade groups alleging that Colorado’s statute exceeded the state’s authority under a provision of the Federal Deposit Insurance Act that allows a state to impose a lower interest rate cap than the federally prescribed one with respect to loans “made in” the state.  In response, Colorado has maintained that this provision allows it to set an interest rate cap on loans when either the lender or the borrower is located in Colorado.  The U.S. District Court for the District of Colorado disagreed, holding that, because loans are “made” only by lenders (not borrowers), Colorado cannot rely on this provision to set an interest rate cap on state-bank lenders not located in Colorado.  WBK previously covered the district court case here.

Notably, the FDIC’s amicus brief relied on what it characterized as the “classic definition of a loan,” under which a “loan of money is a contract by which one delivers a sum of money to another and the latter agrees to return at a future time a sum equivalent to that which he borrows.”  Thus, the agency’s brief contended that the district court erred by considering only the lender’s location, even though the definition of a “loan” makes clear that a loan is a contract that also requires the borrower’s participation.  In other words, the agency suggested that a loan is “made between” a lender and a borrower such that the borrower “co-make[s]” the loan.  Because a loan, in its view, would be “made by” a borrower in Colorado even if only the borrower were located in Colorado, the FDIC concluded (citing other aspects of the statute as additional support) that Colorado could enforce its interest rate cap in this circumstance. 

The FDIC’s notice does not indicate that it has abandoned this position; only that the FDIC is withdrawing the amicus brief “[a]fter the change in Administrations.”