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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
Satisfied Customers: 1611
Experience:  Run my own successful business/contract law practice.
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I am an attorney in need of banking law advice. With respect

Customer Question

I am an attorney in need of banking law advice. With respect to the operation of a bank chartered by and located in Utah and insured by FDIC, but operating in Florida, 12 U.S.C. 1831d preempts state law and allows the Utah bank to charge interest under(1) a formula based upon an interest rate at its Federal Reserve bank; or (2) the Utah interest rate, which is unlimited in the presence of a loan agreement, whichever results in the greater rate. With respect to the operation of a federally-chartered bank, 12 U.S.C. 85 limits its interest rate under the same formula as above. However, Section 85 also states that, where there is no limit under state law, as in Utah, the national bank is limited to 7% or the above formula, whichever is greater. 12 U.S.C. 86 makes a rate above the rate under Section 85 usurious; and Section 1831d(B) makes a rate above the rate under 12 1831d(A) usurious. The legislative purpose of Section 1831d, as stated therein, is to allow state banks to compete with national banks. Nonetheless, does the foregoing mean that there is no limit on the Utah bank's rate, where the national bank is limited per Section 85? Is Section 85 applicable to the FDIC insured Utah bank? Each of Sections 85 and 1831d refer (in their respective notes about the choice of the highest applicable rate) to application to the same loan of their respective provisions (in Section 1831d, via a reference to Section 86). Assuming both statutes are applicable, can the Utah bank disregard Section 85 and rely on Section 1831d to charge an unlimited rate? My hours of research have not provided definite answers; and I would appreciate your assistance. Thank you.
Submitted: 11 months ago.
Category: Business Law
Expert:  Damien Bosco replied 11 months ago.

Hello. Let me make a suggestion. If you are an attorney in your own law practice or with a law firm, you may want to hire a law student as a law clerk to research this issue, even on a temporary basis. Have the clerk write a memo and discuss it. My take on it is that charging an unlimited rate would appear to be against public policy, especially across state lines, and a court would more likely favor a position against usury type interest charges. There are cases that address similar issues with regard to the statutes you mention and interest charged, penalties, late fee disputes...

Customer: replied 11 months ago.
Thank you for replying to my question promptly. I will not be paying any more than my deposit, and I will be seeking a refund of all but the $5.00 posting fee of the $47.00 deposit. Your answer would have been more acceptable if you had simply said that you did not wish to attempt to answer my question.
Customer: replied 11 months ago.
I have nothing to add.
Customer: replied 11 months ago.
I am finished talking. Please activate the rating button.
Customer: replied 11 months ago.
I have actually asked three questions, but the first two are subsumed in the final question as to whether the Utah bank can disregard Section 85 and rely on Section 1831d in charging an unlimited rate in a loan agreement. It is this final question to which I would like an answer. Thank you.
Customer: replied 11 months ago.
I will wait to hear from the new expert.