The state attorneys general have filed their opposition to the FDIC’s motion for summary judgment in their lawsuit to set aside the FDIC’s “Madden-fix” rule.  The filing also includes the AGs’ reply to the FDIC’s opposition to their summary judgment motion.

The lawsuit is pending before the same California federal district court judge (Judge Jeffrey S. White) who is hearing the lawsuit filed by three state AGs to set aside the OCC’s similar Madden-fix rule.Cross-motions for summary judgment have been filed in that case.  Oral argument on the motions was scheduled for May 7, 2021 but on May 6, the Clerk issued a notice vacating the hearing without setting a new date.

In opposing the FDIC’s summary judgment motion, the AGs’ primary arguments are:

  • The FDIC rule is not entitled to deference because Section 27 of the Federal Deposit Insurance Act (12 U.S.C. 1831d) is unambiguous.  By its plain language, Section 27 applies only to interest that a bank can charge.  Even if Section 27 is found to be ambiguous, the FDIC rule impermissibly expands the scope of preemption to nonbank loan buyers and is not a reasonable interpretation of the statute.
  • The FDIC rule is arbitrary and capricious because the FDIC failed to give sufficient consideration to evidence that the rule will likely facilitate rent-a-bank schemes and failed to meaningfully address the true lender doctrine’s applicability to loan sales potentially covered by the rule.

The court’s scheduling order requires the FDIC to file its reply to the AGs’ opposition by July 15, 2021.  Oral argument on the summary judgment motions is scheduled for August 6, 2021.