(CN) – An Indiana law imposing interest rate caps on out-of-state car title lenders unconstitutionally burdens interstate commerce, the 7th Circuit ruled.
The Chicago-based appellate panel shot down a law that forced an Illinois car title lender to get an Indiana license to make consumer loans. That license made Midwest Title Loans subject to Indiana’s regulations on predatory lending, including a ceiling on the annual interest rate that a lender may charge. If the lender doesn’t get an Indiana license, the borrower doesn’t have to repay the loan and is entitled to a refund of excess interest payments.
Judge Richard Posner noted Indiana’s interest in protecting its citizens from predatory lending, but said the Constitution’s dormant Commerce Clause bars “extraterritorial regulation.”
“Suppose Indiana decided that gambling had become a serious problem for its residents – many of them were becoming addicted and this was leading to bankruptcies that were playing havoc with family life and the Indiana economy,” Posner wrote.
Indiana could not force out-of-state casinos to ban Hoosiers from betting more than $10 a day, Posner said.
“To allow Indiana to apply its law against title loans when its residents transact in a different state that has a different law would by arbitrarily to exalt the public policy of one state over that of another.”