Reed Smith Client Alerts

Several months ago, the Colorado Uniform Credit Code Administrator filed a “true lender” complaint in state court against a fintech company that, in partnership with a Utah state bank, made consumer loans to Colorado residents. The fintech company removed the case to Federal Court, asserting that the Colorado usury law, which the Administrator claimed was violated, was completely preempted by the Federal Deposit Insurance Act (FDIA) because the loans were made by the bank. In a decision with significant potential ramifications for these types of partnerships, the Federal Court recently returned the case to state court, finding no federal question jurisdiction. The fintech company must now pursue its federal preemption argument in state court and overcome the Administrator’s claim that the fintech company was the “true lender.”
On March 1, 2018, the U.S. District Court for the District of Colorado (Federal Court) ordered a complaint filed by the Colorado Consumer Credit Administrator (Administrator) against Avant of Colorado, LLC and Avant, Inc. (together, Avant), which had previously been removed to Federal Court by Avant, to be remanded to the Colorado state court in which it was initially filed. This means that the Administrator’s claim in the complaint that Avant made loans to Colorado consumers in violation of Colorado’s usury law, and Avant’s asserted defense that Colorado’s interest rate limitations are preempted by federal law, will be decided in the first instance by the Colorado state court, a fact that could play a significant role in the outcome of the litigation.