BankWest, Inc. v. Baker

Two banks located in South Dakota and two banks located in Delaware (the plaintiff banks) (plaintiffs) made payday loans in Georgia through the use of agents (the plaintiff agents) (plaintiffs). The plaintiff agents opened stores in Georgia to market and service payday loans—small consumer loans that were payable within four to 45 days at interest rates between 17 and 27 percent of the amount loaned. The annual interest rates of the payday loans were between 440 and 520 percent. The plaintiff banks established the terms of the loans, approved or denied applications, and issued the loans. The plaintiff agents received fees from the borrowers, which accounted for a majority of the revenue generated by the loans. The legislature of Georgia (defendant) enacted a payday-lending law prohibiting out-of-state banks from using in-state agents to make payday loans if the agents had the principal economic interest in the revenue generated by the loans. The plaintiff banks and agents filed a lawsuit against Georgia in federal district court, arguing that Georgia’s payday-lending law was preempted by the Federal Deposit Insurance Act (FDIA). The FDIA allowed state banks to apply their home-state interest rates to borrowers in other states. The plaintiff banks and agents moved for a preliminary injunction enjoining Georgia’s law, arguing that the injunction would serve the public interest by allowing them to continue to grant short-term loans to Georgia’s consumers.