These payday stores are not banks or subsidiaries of banks

These payday stores are not banks or subsidiaries of banks

The Supreme Court’s recent decision in Small v. United States, 544 U.S. ___, 125 S. Ct. 1752, 161 L. Ed. 2d 651 (2005), does not dictate a different interpretation here. In that case, the Court dealt with 18 U.S.C. § 922(g) (1)’s prohibition on the possession of firearms by persons who had been «convicted in any court» of a felony. Id. at 1754. The Court began with «the legal presumption that Congress ordinarily intends its statutes to have domestic, not extraterritorial, application.» Id. at 1755. Finding «no convincing indication to the contrary» of that presumption, the Court concluded that § 922(g) (1)’s reference to convictions entered in «any court» means convictions entered in a domestic court. Id. at 1756. No such presumption applies here where all the parties and transactions involved in this case are domestic.

The majority states: «Indeed, the language of § 27(a) says nothing about the loan procurement or collection practices by agents and nothing about agents, much less in-state, non-bank agents of out-of-state banks. Instead, § 27(a)directly restricts only interest-rate limitations and cannot be so expanded to cause indirect preemption of the agency agreement between in-state entities, such as payday stores, and out-of-state banks.» Ante, at 1305 n. 25 (emphasis in original).

The second set of plaintiffs are corporations, such as Advance America, First American Cash Advance of Georgia, Cash America Financial Services, and others that operate payday stores in Georgia. Rather, these payday stores are wholly independent businesses with physical locations in Georgia. For example, Advance America operates 89 payday stores in Georgia.

What Georgia says it has the power to regulate in the Act are in-state payday stores in these two ways: (1) to prohibit in-state payday stores from making payday loans directly to borrowers; and (2) to restrict in-state payday stores from acting as agents for exempt entities in the one circumstance where the in-state payday store holds the predominate economic interest in the payday loans.

Because the prohibited agency conduct in § 16-17-2(b) (4) is subject to the exceptions in § 16-17-2(a), the Act also specifically exempts out-of-state banks from the reach of § 16-17-2(b) (4). See id. §§ 16-17-2(a) (3), (b). Again, the Act targets the conduct of in-state payday stores, not out-of-state banks.

The plaintiffs raised five claims in the district court but press only three of them here. Those three claims are that the Georgia Act: (1) is preempted by § 27(a) of the FDIA; (2) violates the dormant Commerce Clause; and (3) violates the Federal Arbitration Act. Before discussing these issues, we address what deference is due to Federal Deposit Insurance Corporation («FDIC») positions regarding preemption.

With regard to conflict preemption, this is not a case where compliance with both the state and federal laws is impossible. As in Barnett Bank of Marion County v. Nelson,» [t]he two statutes do not impose directly conflicting duties on [state] banks – as they would, for example, if the federal law said, `you must [export your home-state interest rate],’ while the state law said, `you may not.'» 517 U.S. 25, 31, 116 S. Ct. 1103, 1108, 134 L. Ed. 2d 237 (1996). Therefore, the conflict preemption question turns on whether the Act «stands as an obstacle to achieving the objectives of the federal law,» Hughes v. Att’y Gen. of Florida, 377 F.3d 1258, 1265 online payday loans Belpre Ohio (11th Cir. 2004) (citing Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 372-73, 120 S. Ct. 2288, 2294, 147 L. Ed. 2d 352 (2000) and Cliff, 363 F.3d at 1122), or whether the Act substantially impairs the right created by the federal law. Barnett Bank, 517 U.S. at 33, 116 S. Ct. at 1109. For the following reasons, the Act does not stand as an obstacle to achieving this objective or substantially impair the right created by the federal law, and, therefore, there is no conflict preemption.

It is the in-state payday stores’ agency relationships that the State of Georgia has attempted to regulate, but only when the payday store retains the predominate economic interest in the loan revenues

Second, the Supreme Court has instructed that in interpreting a federal statute, including one that expressly preempts state law, federal courts must consider Congressional intent and purpose, as these are the «touchstone in every pre-emption case.» Medtronic, 518 U.S. at 485, 116 S. Ct. at 2250 (internal quotation marks and citations omitted).

On the other hand, as discussed above, Georgia can regulate a variety of collateral activities associated with loans. If Georgia had enacted legislation that precluded felons convicted of fraud from being licensed fiscal agents in loan transactions in Georgia or precluded banks (including out-of-state banks) from employing such felons in Georgia as third-party vendors or service providers to handle loan funds, we would have no difficulty determining that such state legislation was not preempted by § 27(a). None of the parties dispute Georgia’s ability to regulate agency arrangements between in-state felons and out-of-state banks. Likewise, no one disputes Georgia’s ability to regulate in-state businesses, such as the local payday stores in this case.

While the Act exempts out-of-state banks from direct liability in § 16-17-2(d), we also must discuss the remainder of § 16-17-2(d) because the parties dispute whether it could be used to prosecute an out-of-state bank as an «aider and abettor» of the in-state payday store’s violation of the Act. The district court determined that the Act does not apply to out-of-state banks that «aid or abet» in-state agents by entering into prohibited agency contracts with them. See Bankwest, Inc. v. Baker, 324 F. Supp. 2d 1333, 1346 n. 7 (N.D. Ga. 2004). Section 16-17-2(d) contains the only aid-and-abet provision in the Act and provides:

Section 16-17-3 provides three things: (1) any person who violates §§ 16-17-2(a) or (b) shall be barred from collecting the indebtedness created by said loan transaction; (2) said loan transaction is void ab initio; and (3) any person who violates §§ 16-17-2(a) or (b) shall be liable for civil damages

Having concluded that § 16-17-2(b) (4)’s prohibition of one type of agency agreement and § 16-17-2(d)’s penalty for violating the agency-agreement prohibition are not preempted by § 27(a), we next must consider whether § 16-17-3 of the Georgia Act is preempted. Specifically, § 16-17-3 states, in relevant part:

Maybe there will be breaches, and maybe in connection with those breaches someone will elect arbitration, and maybe if that happens the Georgia statutory provision in question will be asserted and applied. But maybe is not enough. See id. Having failed to demonstrate imminent or certainly impending injury from Ga.Code Ann. § 16-17-2(c) (2), the out-of-state banks and payday stores lack standing to challenge this provision. It necessarily follows that the district court did not abuse its discretion in denying them a preliminary injunction against enforcement of the provision.

We are referring specifically to the arbitration portion of the loan agreement between BankWest, Advance America, and the borrower. As we stated before, we have been led to believe that this agreement is typical

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