A majority of the judges on a federal appeals court voted Wednesday to vacate a June decision that industry lawyers feared would lay the groundwork for subjecting banks to usury laws.
The U.S. Court of Appeals for the Eleventh Circuit in Atlanta said all 12 of its active judges, plus a retired one who was on the three-judge panel that issued the original ruling, would rehear the case, BankWest v. Baker.
The case concerns a Georgia lending law that prohibits payday lenders from charging annual percentage rates above 16%.
The three-judge panel had found that generally, the Federal Deposit Insurance Act, which lets banks chartered in other states export interest rates, does not preempt the Georgia law, because the state is regulating only bank agents, not banks themselves.
Alan S. Kaplinsky, a partner at the law firm Ballard Spahr Andrews & Ingersoll LLP, who is representing two of the banks that filed the suit, said it is very rare for an appellate court to grant such a rehearing.
"If it had not been vacated," the three-judge panel's ruling "threatened to wreak enormous havoc on the banking industry, since it provided an easy end run for states hell-bent on avoiding federal preemption," Mr. Kaplinsky said.
"While it is impossible to predict the ultimate outcome here," the decision to rehear the case "is exceptionally good news," since a majority of the active judges on the court had to vote in favor of a rehearing, he said.
