Bank Preemption

This Wisconsin small claims court complaint brought by a consumer against a party to a rent-a-bank scheme demonstrates another approach to challenge rent-a-bank schemes, even where the bank is considered the true lender.  The consumer can assert non-usury claims against the bank's partners.  The company "renting" the bank may be liable as someone who arranges or brokers the loan.  In Wisconsin the company may have to be licensed and comply with the requirements of the state credit services organization act.

States have long used interest-rate caps to prevent predatory lending. In light of the comprehensive federal regulatory regime to which national banks are subject, Congress exempted them from compliance with state rate caps in the National Bank Act (“NBA”). 12 U.S.C. § 85 (allowing national banks to “take, receive, reserve, and charge” interest in excess of state law); see also 12 U.S.C. § 1463(g)(1) (same for federal savings associations).

Does the preemption of state usury laws enjoyed by national banks under the National Bank Act extend to non-bank debt buyers where, as here, the national bank retains no interest in or control over the subject accounts, and the national bank and the debt buyer are operationally and legally unrelated entities?

This is a 2021 state court complaint alleging that, in a rent-a-bank situation, the credit agreements with an out-of-state bank did not comply with Wisconsin's non-interest rate regulation of consumer credit.  Although not stated in the complaint, the bank could not rely on Riegle-Neal preemption as to Wisconsin non-interest rate regulation because TAB Bank had no branches in Wisconsin.  As a result, it had to comply with Wisconsin non-interest rate regulation and not that of its home state regulation.  The case was removed to federal court and the federal case resulted