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4000 - Advisory Opinions
Section 521 of the Depository Institutions Deregulation and
Monetary Control Act of 1980 Authorizes Insured State-Chartered Banks
to Export Same Fees and Charges on Interstate Loans That National Banks
May Under 12 U.S.C. § 85
FDIC-92-47
July 8, 1992
Douglas H. Jones, Deputy General Counsel
You have requested that we confirm our interpretation that section
521 of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("DIDA"), Pub. L. No. 96--221, 94 Stat. 132 (1980),
codified as section 27 of the Federal Deposit Insurance Act (12 U.S.C.
§ 1831d), authorizes state-chartered banks insured by the Federal
Deposit
{{10-30-92 p.4650}}Insurance Corporation ("FDIC") to
"export" the same fees and charges on interstate loans that
national banks can export under 12 U.S.C. § 85 ("Section 85''). In
this regard, you have asked us to assume that the state in which the
loans are made has not exercised the right provided under Section 525
of DIDA to "opt-out" of the Section 521 preemption. For the
reasons stated below, and on the basis of this assumption, we confirm
that section 521 provides the same exportation rights as Section 85.
It is well established that Section 85 provides national banks with
"most favored lender" powers (Tiffany v. Nat'l Bank of
Missouri, 85 U.S. (18 Wall.) 409 (1874)) and the ability to export
interest on interstate loans (Marquette National Bank of
Minneapolis v. First of Omaha Service Corporation, 439 U.S. 299
(1978)). Moreover, the FDIC consistently has interpreted Section 521 to
provide state-chartered banks with the same most favored lender status
and right to export interest enjoyed by national banks under Section
85. See e.g. Letter from Frank L. Skillern, Jr., General
Counsel, FDIC, #81--3, [1988--89 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81,006 at 55,107 (February 2, 1981) (most favored
lender); Letter from Kathy A. Johnson, Attorney, FDIC, #81--7 [1988-89
Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81,008 at 55,110
(March 17, 1981) (exportation).
Accordingly, it is our position that Section 521 authorizes
state-chartered FDIC-insured banks to charge interest at the rate
allowed to the "most favored lender" by the laws of the state in
which the bank is chartered, even if that rate exceeds the maximum
permitted by an out-of-state borrower's state of residence. That
authorization necessarily includes the right to charge late fees and
other charges permitted by the bank's home state which are either a
component of interest or material to the determination of the interest
rate.
There are several bases for our interpretations of Section 521.
First, the operative language of Sections 521 and 85 is identical and
Congress is presumed to intend to adopt the judicial construction of a
phrase from an existing statute when it uses the same phrase in a new
statute. Fusco v. Perini North River Associates, 601 F.2d
659, 664 (2d Cir. 1979), vacated on other grounds, 444 U.S.
1028 (1980). Second, Section 521 expressly provides that the purpose of
the statute was to prevent discrimination against state-chartered
banks. State banks would suffer such discrimination if they did not
enjoy the same exportation rights provided to national banks under
Section 85. Third, and finally, the legislative history of Section 521
clearly indicates that Congress intended to provide state-chartered
banks with the same interest authority that is granted to national
banks under Section 85.
We are aware that our interpretation of Section 521 is inconsistent
in some respects with the recent decision in Greenwood Trust Co.
v. Commonwealth of Massachusetts, 776 F.Supp. 21 (D. Mass. 1991),
appeal pending, Nos. 91--2205, 91--8096 and 92--1065 (1st
Cir. argued June 3, 1992). However, as we have already explained to the
First Circuit Court of Appeals in connection with the appeal of that
case, 1
we believe that the Greenwood Trust case did not properly
recognize (i) the compelling evidence that Congress intended that
Section 521 provide state banks with the same interest authority
national banks enjoy under Section 85, or (ii) the scope of the
interest authority under Section 85 as interpreted by the Office of the
Comptroller of the Currency and the courts. See, e.g., OCC
Interpretive Letter No. 452 from Robert Serino, Deputy Chief Counsel,
[1988--89 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,676 at
78,063 (August 11, 1988). Moreover, we disagree with at least two bases
that apparently underpinned the District Court's interpretation of
Section 521.
First, we do not believe that legislative history and cases relating
to Section 501 of DIDA, 12 U.S.C. § 1735f--7a, are instructive in
interpreting Section 521 because the genesis, purpose, scope and
language of Sections 501 and 521 are radically different. Section 501
originated as part of S.1347, 96th Cong., 1st Sess. (125 Cong. Rec.
14889 (1979)), while Section 521 originated as Section 101 of S.1988,
96th Cong., 1st Sess. (125
{{10-30-92 p.4651}}Cong. Rec. 14887) (1979)). See
Usury Lending Limits: Hearings Before the Committee on Banking, Housing
and Urban Affairs, United States Senate, on S. 1988, To Equalize
Competition Between State and National Banks and For Other Purposes,
96th Cong., 1st Sess. 8--10 (December 17, 1979). Section 501 was
intended to facilitate a national residential mortgage lending market
(125 Cong. Rec. 14887 (1979) (Statement of Senator Cranston)), while
Section 521 was intended to provide parity in the interest that could
be collected by state-chartered and national banks (126 Cong. Rec. 4217
(1980) (Statement of Senator Bumpers)). Section 501 applies to
first-lien mortgage loans made by various types of lenders while
Section 521 applies to any loan made by FDIC-insured state-chartered
banks.
Second, we do not believe that the existence of an opt-out right
under Section 525 of DIDA, in and of itself, affects the scope of the
exportation rights provided by Section 521. We believe that the scope
of Section 521 must first be determined by reference to interpretations
of the identical language in Section 85 before the effect (if any) of
Section 525 on a particular transaction can be determined. In the
question you have presented, the loans are not made in a state that has
opted-out under Section 525. Thus, Section 525 has no effect in such a
state on the scope of exportation rights provided under Section 521.
This letter sets forth our interpretation of Section 521. However,
notwithstanding our position on this issue, the possibility remains
that the Greenwood decision may be upheld on appeal or that
other courts may ultimately adopt a different interpretation of the
statute. Accordingly, you should consult with your counsel regarding
the status of the Greenwood case and any other decisions
that may be rendered by a court of competent jurisdiction with respect
to the issues discussed in this letter.
I trust that this letter is responsive to your inquiry. If you have
any further questions, you may contact me or Assistant General Counsel,
Thomas A. Schulz.
1The FDIC filed an amicus curiae brief with the
First Circuit in the Greenwood appeal setting forth more
fully its interpretation of Section 521. See Brief for the
Federal Deposit Insurance Corporation As Amicus Curiae, Greenwood
Trust Co. v. Commonwealth of Massachusetts and L. Scott Harshbarger,
Attorney General of the Commonwealth of Massachusetts, Nos.
91--2205, 91--8096 and 92--1065 (1st Cir. argued June 3, 1992). Go Back to Text
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