Applying Pennsylvania’s usury laws to out-of-state lending companies does not violate the commerce clause, a federal appellate court has ruled in a precedential opinion.
A three-judge panel of the U.S. Court of Appeals for the Third Circuit has unanimously ruled that Pennsylvania’s Department of Banking and Securities can investigate and apply its anti-usury laws against TitleMax, an out-of-state lender that has no brick-and-mortar locations in the Keystone State and no advertising presence either. The lender, which has offices in Delaware, Ohio and Virginia and focuses on auto loans, offers lending agreements with interest as high as 180%.
The ruling overturns a decision from the U.S. District Court for the District of Delaware, which held that, by applying its usury laws extrajudicially, the Pennsylvania was violating the commerce clause.
In the case, TitleMax of Delaware v. Weissmann, Third Circuit Judge Patty Shwartz led the panel that included Judges David Porter and Michael Fisher.
“Unlike the sale of a good, a TitleMax loan has a longer lifespan: it involves later payments and permits a physical taking (repossession) from inside another state,” Schwartz said in the 19-page opinion. “Because TitleMax both receives payment from within Pennsylvania and maintains a security interest in vehicles located in Pennsylvania that it can act upon, its conduct is not ‘wholly outside’ of Pennsylvania.