The agreement between plaintiffs Advance America (an in-state payday store) and BankWest (an out-of-state bank) is in the record, and again we have been led to believe that it is typical. Under the agreement, Advance America pays for all costs related to its storefront locations and employees. 4 Advance America procures the borrower and submits a loan application to BankWest. BankWest then approves (or denies) the application and advances all funds. 5
If the loan loss is 8
In addition, if a borrower does not pay back the loan, the agreement transfers part of the loan loss to Advance America. 6 Every three months, the total amount of BankWest loans that Advance America cannot collect (known as loan loss) is calculated. 5% or less of the total amount of the finance charges (which are 17% of the loan) over that period, then BankWest absorbs the loss. 7 That means BankWest absorbs the first 1.45% (8.5% of 17%) of the total loan amounts. However, if the loan payday loan Dublin no credit check loss exceeds 8.5% of the finance charges, BankWest reduces the amount owed to Advance America for its services by that excess up to 13.8% of the total loans made. In other words, BankWest absorbs the loan losses up to the point where they equal 1.45% of the total loans, and Advance America absorbs the losses to the extent they exceed 1.45% up to 13.8% of the total loans. If the loan losses exceed 13.8% of the total loans, BankWest bears the remaining risk of loss. 8
Further, the agreement allocates the loan revenues largely to Advance America. 9 That is the finance charge. Advance America’s total compensation is a $ “marketing and servicing fee” for every $100 advanced to a borrower. 10 As a result, Advance America, the payday store, receives 81% ($ out of $17) of the loan revenues generated by the finance charge. The parties do not dispute the fact that, under their agency agreements with the out-of-state banks, the plaintiff payday stores have the predominate economic interest in the revenues generated by the payday loans in issue.
As noted earlier, in Georgia, there is a 16% cap on the interest rate that in-state payday stores, and even in-state banks, may charge for loans under $3,000. Georgia, however, cannot prevent an out-of-state bank from charging its higher home-state interest rates because § 27(a) of the FDIA authorizes a state-chartered bank to charge the interest rates allowed under the laws of its charter state in any other state where it does business. Specifically, FDIA § 27(a) covers “any loan” of the out-of-state bank but addresses solely the interest-rate element of the loan, as follows:
In order to prevent discrimination against State-chartered insured depository institutions, . such State bank . may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, . charge on any loan . interest . at the rate allowed by the laws of the State . where the bank is located.
The agreement states that the maximum amount of any loan is $1,000 and that borrowers are charged $17 for every $100 borrowed
Georgia recognizes that the plaintiff out-of-state banks in this case are authorized to charge the high-interest rates of 400-500% under the laws of their charter states. 11 Given § 27(a), Georgia cannot regulate or restrict out-of-state banks acting for themselves from charging these high-interest rates on out-of-state bank loans in Georgia. Georgia does not dispute that “any” means “any loan” of the out-of-state bank. As explained later, this is why Georgia has exempted out-of-state banks throughout the payday loan Act in issue.