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Preemption of State Interest Rate Limitations: Current Challenges Involving Bank Partnership Models

Author: Ashley M. Simonsen.

Source: Volume 36, Number 01, January 2020 , pp.1-9(9)

Abstract:

Federal preemption of state usury laws is currently under attack by “true lender” theories. The author discusses the statutory and regulatory background of preemption and “true lender” challenges to bank partnership models. She then argues that preemption should apply to any loan for which a bank contracts and provides funds to the borrower. Widespread adoption of the alternative “true lender” framework, she argues, would undermine the liquidity that is essential to a robust lending market.

Keywords: “True Lender” Theory; Madden v. Midland Funding, LLC; Meade v. Marlette Funding LLC; Meade v. Avant of Colorado LLC; Federal Preemption

Affiliations: 1: Covington & Burling LLP.