The Honorable Ortrie D. Smith, United States District Judge

for the Western District of Missouri, sitting by designation.

___________

No. 96-1763

___________

John Doe; John Roe, on behalf *

of themselves and all others *

similarly situated, *

*

Appellants, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Norwest Bank Minnesota, N.A., *

a national banking association; *

Voyager Guaranty Insurance *

Company, *

*

Appellees. *

___________

 Submitted: December 11, 1996

 Filed February 28, 1997

___________

Before BOWMAN and HEANEY, Circuit Judges, and SMITH, District Judge. 1

___________

BOWMAN, Circuit Judge.

John Doe and John Roe brought a class action against Norwest Bank

Minnesota, N.A. (Norwest) and Voyager Guaranty Insurance Company (Voyager),

alleging violations of the usury provisions of the National Bank Act, 12

U.S.C. § 85-86 (1994), the anti-tying provisions of the Bank Holding

Company Act Amendments of 1970, 12 U.S.C. § 1972 (1994), and the Racketeer

Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (1994). Doe

settled his
 The Honorable Michael J. Davis, United States District Judge

for the District of Minnesota, adopting two reports and

recommendations of The Honorable John M. Mason, United States

Magistrate Judge for the District of Minnesota.

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claims and was dismissed from the case. The District Court granted

2

judgment in favor of the defendants on the federal claims and declined to

exercise supplemental jurisdiction over the plaintiffs' state-law claims.

Roe appeals, and we affirm.

I.

Before summarizing the facts, we consider the relevance of Doe's

claim to this case. Although Doe settled his claim and was dismissed from

the case, Roe argues that "Doe's suitability as a class representative

remains in issue." Roe's Br. at 1 n.2. We disagree. This action was

filed on November 3, 1994, and Doe agreed to settle on February 28, 1995.

When Doe apparently had misgivings, the defendants moved the court to

enforce the settlement agreement and dismiss Doe from the case. The

District Court did so, dismissing Doe on September 11, 1995, and Doe has

not appealed that order. Accordingly, Doe is no longer a party to this

action, individually or in his capacity as a class representative.

Of course, the dismissal of Doe did not affect the claim of Roe or

the claims of the unnamed class members in any way. This case remains a

putative class action with Roe as representative. We will therefore

summarize the facts of Roe's claim. In 1989, Roe purchased a pickup truck

from a dealer and entered into an installment contract, granting the dealer

a security interest in the pickup truck. The dealer assigned the contract

to Norwest. Several provisions of the installment contract addressed

insurance on the pickup truck:
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Insurance on property I [Roe] give as security is required. If

insurance is required, I may buy it through any insurance agent

or company of my choice. . . .

. . .

If you [Norwest] require property insurance, it must cover all

risks of physical damage to the property and the risk that the

vehicle may be lost. . . . I promise to keep the property

insured throughout the term of my loan and to deliver a

certificate of insurance to you that shows I have purchased

insurance of this kind.

. . .

I also agree that, if I fail to keep any required insurance on

the property, you may purchase such insurance for me. I will

immediately repay you for any amounts you spend in purchasing

that insurance, plus interest at the "annual percentage rate"

disclosed on the other side of this contract.

Roe's App. at 135-36. At the same time, Roe signed a document entitled

"Agreement to Provide Accidental Physical Damage Insurance," which read:

I understand that to provide protection from serious financial

loss, should an accident or loss occur, Norwest . . . requires

the collateral securing my loan to be continuously covered with

insurance against the risks of fire, theft, and collision, and

that failure to provide such insurance gives Bank the right to

declare the entire unpaid balance immediately due and payable

or alternatively to purchase coverage for its interest and add

the premium plus interest to the balance. . . .

I further understand and agree to maintain insurance, as

described above, in force during the term of the loan and will

furnish Norwest . . . with a loss payable endorsement upon each

renewal of said insurance.

Norwest's App. at 69.

In February 1993, Norwest notified Roe that it had not received proof

of insurance and warned him that if he failed to provide proof of

insurance, Norwest could exercise its right to
-4-

purchase insurance. Norwest's letter notified Roe that if the bank

purchased insurance, the premium of $902 (for a year of coverage) would be

added to his loan balance. When Roe did not provide proof of insurance,

Norwest purchased insurance from Voyager and added $902 to Roe's balance.

Voyager then sent Roe a certificate of coverage, which indicated that only

Norwest's interest in the vehicle was insured.

When that coverage expired in January 1994, Norwest again warned Roe

that it had not received proof of insurance. The same process was

repeated, and Norwest purchased insurance and added the premium of $549 to

Roe's loan balance. In June 1994, Roe apparently proved to Norwest that

he had procured his own insurance, and Norwest credited his loan with $233,

the unearned portion of the $549 premium. At about the same time, Norwest

added to Roe's loan a charge of $11.60 for interest on the insurance

charge.

As part of its collateral protection insurance program, Norwest has

an umbrella insurance policy with Voyager, pursuant to which Norwest

purchases insurance when borrowers fail to provide their own insurance.

When Norwest purchases insurance from Voyager with respect to a particular

piece of collateral, the insurance covers only Norwest's interest in the

collateral. The coverage, which is otherwise similar to ordinary

comprehensive and collision coverage, is limited to either the damage to

the collateral or the balance of the customer's loan, whichever is smaller

in amount. The umbrella policy also contains two endorsements that are

significant in this case. The first endorsement, entitled "Waiver of

Repossession Requirement," waives the requirement that Norwest repossess

the borrower's vehicle before making a claim. The second, the "Waiver of

Salvage Deduction on Non-Repossession Claims," modifies the policy so that

the amount payable to Norwest on a claim is not reduced by the salvage

value of the borrower's
 Prior to January 1991, Norwest had a different policy with

Voyager that contained additional endorsements. This policy is not

relevant here. Roe also claims that Norwest imposed an additional

charge for calculating his premium based on the outstanding

principal balance rather than the sum of principal and interest.

However, Norwest introduced undisputed evidence that no such charge

was made to Roe's account because the charge applies only to

simple-interest accounts, which Roe's was not.

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vehicle. Roe's arguments that insurance charges attributable to these

3

endorsements were unauthorized form the basis of this action.

The plaintiffs brought this action in federal district court,

asserting claims under the National Bank Act and the Bank Holding Company

Act against Norwest only and a RICO claim against Voyager only. After

permitting discovery and dismissing Doe from the case, the District Court

granted summary judgment to the defendants on the National Bank Act claim

and dismissed the anti-tying and RICO allegations for failure to state a

claim on which relief could be granted. See Doe v. Norwest Bank Minn.,

N.A., 909 F. Supp. 668 (D. Minn. 1995) (order dismissing RICO count). The

court dismissed these federal claims with prejudice and declined to

exercise supplemental jurisdiction over the state-law claims, dismissing

them without prejudice. Roe's appeal challenges the dismissal of the

federal claims.

II.

We address the National Bank Act claim first. Insofar as it is

relevant here, the National Bank Act permits a national bank to charge

"interest at the rate allowed by the laws of the State . . . where the bank

is located . . . and no more." 12 U.S.C. § 85 (1994). Section 86 provides

a federal cause of action for usury against a national bank that "tak[es],

receiv[es], reserv[es], or charg[es] a rate of interest greater than is

allowed by section 85 of this title." 12 U.S.C. § 86 (1994); see also M.

Nahas & Co. v. First Nat'l Bank, 930 F.2d 608, 612 (8th Cir. 1991) (remedy

of § 86
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completely preempts state-law usury actions against national banks); Fisher

v. First Nat'l Bank, 548 F.2d 255, 257 (8th Cir. 1977) (interest rate a

national bank may charge is ultimately a question of federal law).

Roe argues that the "unauthorized" charges attributable to the

repossession and salvage waivers, and perhaps the full amount of insurance

charges, should be considered interest with respect to his installment

loan. Norwest argues that charges for insurance are not interest at all,

but even if they were considered interest, the total interest rate on Roe's

loan would be below the allowable cap under Minnesota law. The parties'

experts assumed that all the charges were interest but used different

interpretations of the Federal Reserve's Regulation Z (12 C.F.R. pt. 226

(1996)) to support their conclusions: Roe's expert calculated the interest

rate by amortizing the insurance charges over the period of time from when

they were imposed to the end of the loan term, while Norwest's expert

amortized the insurance charges, like the ordinary interest charges, over

the entire length of the loan. The District Court assumed that all the

insurance charges were interest and approved the calculation method of

Norwest's expert. Because that method resulted in an interest rate below

the maximum allowed by Minnesota law, the court granted summary judgment

to Norwest.

We review a grant of summary judgment de novo, affirming only if the

record, viewed in the light most favorable to the nonmoving party, shows

no genuine issue of material fact and the moving party is entitled to

judgment as a matter of law. See Smith v. City of Des Moines, 99 F.3d

1466, 1468-69 (8th Cir. 1996). We may affirm on any ground supported by

the record. See Phillips v. Marist Soc'y, 80 F.3d 274, 275 (8th Cir.

1996).

We need not resolve the parties' thorny dispute about the correct

interpretation of Regulation Z, nor need we decide the less-complicated

question of the applicable interest-rate cap under
 Roe argues that Norwest has raised this issue for the first

time on appeal. This assertion is patently untrue. See Report and

Recommendation of Dec. 21, 1995, at 4 ("Defendant makes a

compelling argument that [the charges] are not interest for any

purpose.").

-7-

Minnesota law. Instead, we conclude that collateral protection insurance

premiums charged to a borrower's account do not, as a matter of federal

law, constitute "interest" within the meaning of § 85.4

The Office of the Comptroller of the Currency recently issued an

interpretive ruling regarding the meaning of the term "interest" in § 85.

That ruling reads:

The term "interest" as used in 12 U.S.C. 85 includes any

payment compensating a creditor or prospective creditor for an

extension of credit, making available of a line of credit, or

any default or breach by a borrower of a condition upon which

credit was extended. It includes, among other things, the

following fees connected with credit extension or availability:

numerical periodic rates, late fees, not sufficient funds (NSF)

fees, overlimit fees, annual fees, cash advance fees, and

membership fees. It does not ordinarily include appraisal

fees, premiums and commissions attributable to insurance

guaranteeing repayment of any extension of credit, finders'

fees, fees for document preparation or notarization, or fees

incurred to obtain credit reports.

Interpretive Rulings, 61 Fed. Reg. 4849, 4869 (1996) (to be codified at 12

C.F.R § 7.4001(a)) (emphasis added). Although this ruling is a recent one,

it has already received the imprimatur of the Supreme Court. In Smiley v.

Citibank (S.D.), N.A., 116 S. Ct. 1730 (1996), the Court unanimously held

that the word "interest" in § 85 was ambiguous and that the Comptroller's

judgment as to its meaning was entitled to deference under Chevron U.S.A.

Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 (1984). See

Smiley, 116 S. Ct. at 1732-33. The Court then concluded that the

Comptroller's inclusion of late fees within the meaning of
-8-

"interest" was a reasonable interpretation of the statute. See id. at

1735. Because the law of South Dakota, Citibank's home state, permitted

banks to charge late fees, the determination that late fees are interest

for National Bank Act purposes put an end to the state-law claims of

Smiley, a California resident. See id. at 1732; Marquette Nat'l Bank v.

First of Omaha Serv. Corp., 439 U.S. 299, 313 (1978) (national bank may

charge interest allowed by its home state even if such interest would not

be allowed to bank in borrower's home state).

In the instant case, we are faced with a slightly different issue.

If we accept the Comptroller's judgment that "premiums and commissions

attributable to insurance guaranteeing repayment of any extension of

credit" are not "interest," and we conclude that the charges involved here

are premiums within that definition, Roe's claim must fail because he

cannot show that Norwest charged "a rate of interest greater than is

allowed by section 85." 12 U.S.C. § 86 (1994) (emphasis added).

We have little difficulty concluding that the Comptroller's

interpretation of "interest" as excluding insurance premiums is reasonable.

The Supreme Court has already determined that "interest," as it is used in

§ 85, is not an unambiguous term. See Smiley, 116 S. Ct. at 1732-33. Our

inquiry, therefore, is whether "the agency's answer is based on a

permissible construction of the statute." Chevron, 467 U.S. at 843.

Certainly the ordinary definition of "interest" does not include insurance

premiums passed along from creditor to debtor. See Black's Law Dictionary

812 (6th ed. 1990) ("Interest is the compensation allowed by law or fixed

by the parties for the use or forbearance of borrowed money."); Smiley, 116

S. Ct. at 1735 (interest is "`compensation which is paid by the borrower

to the lender or by the debtor to the creditor for . . . use [of money]'")

(quoting 1 J. Bouvier, A Law Dictionary 652 (6th ed. 1856)) (alterations

in Smiley). Indeed, we believe it is quite sensible to conclude that such

premiums are not interest
 The opinions in the Kenty case express different views of the

collateral protection insurance in that case. On a motion to

dismiss, the district court held that insurance charges that were

"unauthorized and unnecessary to protect the collateral" could be

considered interest on the loan. See Kenty v. Bank One, Columbus,

N.A., 1992 WL 170605, at *4 (S.D. Ohio Apr. 23, 1992). At the

summary judgment stage, however, the court concluded that state law

imposed no maximum on the allowable interest rate, so that it did

not matter whether any portion of the insurance charges was

considered interest. See Kenty v. Bank One, Columbus, N.A., 1993

WL 592532, at *5 (S.D. Ohio Oct. 25, 1993). The Sixth Circuit saw

Kenty's argument slightly differently, believing Kenty was

complaining about the bank's charging interest on the insurance

charges. That court concluded that the insurance premiums were

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but rather additions to the principal of the loan, or perhaps separate

extensions of credit entirely. See Kenty v. Bank One, Columbus, N.A., 92

F.3d 384, 393 (6th Cir. 1996). And, as the Court stated in Smiley, it is

"quite possible and rational to distinguish, as the regulation does,"

between charges that are specifically assigned to the expenses of the bank

in undertaking such activities as processing an application, insuring a

loan, or appraising collateral and, on the other hand, charges "that are

assessed for simply making the loan, or for the borrower's default."

Smiley, 116 S. Ct. at 1734. We conclude that the Comptroller's ruling

excluding "premiums and commissions attributable to insurance guaranteeing

repayment of any extension of credit" from the definition of "interest" is

reasonable.

The question remains whether the charges involved here fit within the

Comptroller's definition. Although collateral protection insurance has

produced a substantial body of case law in recent years, we have been

unable to locate any cases addressing the precise issue presented here in

light of Smiley. Cf. Giddens v. Hometown Fin. Servs., 938 F. Supp. 801,

806-07 (M.D. Ala. 1996) (suggesting that insurance premiums are not

interest; holding that case was improperly removed); Kenney v. Farmers

Nat'l Bank, 938 F. Supp. 789, 793-94 (M.D. Ala. 1996) (same). But cf. Moss

v. Southtrust Mobile Servs., Inc., No. CV-95-P-1647-W (N.D. Ala. Sept. 22,

1995) (holding, without discussion of Comptroller's ruling, that

unauthorized premiums are interest and finding state-law claims completely

preempted).5
themselves loans, and so state law permitted the bank to charge any

amount of interest on the premiums. See 92 F.3d at 393. None of

these opinions addresses the Comptroller's interpretation of § 85.

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Roe argues that the charges added to his account are in fact not

premiums attributable to insurance, but rather charges "compensating a

creditor or prospective creditor for . . . [a] default or breach by a

borrower," which would fit them within the Comptroller's definition of

"interest." See 61 Fed. Reg. at 4869. It is true that Norwest charges a

borrower for insurance only after the borrower breaches the covenant to

maintain insurance. But there is a notable difference between a late fee,

which compensates the creditor solely for the effects of the debtor's

default, and an insurance charge, which compensates the creditor for the

cost of protecting its security, a cost the debtor is supposed to bear

anyway. In addition, the limitation of the coverage in this case to the

lesser of the damage to the collateral or the loan balance indicates that

the insurance is designed to guarantee the repayment of the loan.

Accordingly, we believe that these collateral protection insurance premiums

are excluded by the Comptroller's interpretive ruling from the general

category of charges compensating a creditor for a default or breach and

placed in the category of premiums attributable to insurance guaranteeing

the repayment of credit extended.

Roe also argues that even if the basic insurance coverage is not

interest, the allegedly unauthorized aspects of the insurance must be

considered interest. We disagree. The charges related to the waiver of

repossession and waiver of salvage endorsements are not trivial; Roe's

expert calculated that these endorsements accounted for more than thirty

percent of the total premium charged to Roe. But Norwest introduced

undisputed evidence that these endorsements placed Norwest in exactly the

same position in which
 At times in his brief and at oral argument, counsel for Roe

seemed to be challenging a third endorsement, entitled "Automatic

Coverage," which covers collateral retroactively to the date on

which the borrower's own insurance lapsed. We see no reason to

treat this endorsement any differently from the others, as it also

merely replicates the coverage Roe was contractually obligated to

provide.

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it would have been if Roe had purchased a standard Minnesota automobile

insurance policy and named Norwest as loss payee, as the loan agreement

required him to do. In other words, under an ordinary policy in Minnesota,

a lender named as loss payee would not have to repossess a wrecked car in

order to make a claim, and the amount received by the lender would not be

reduced by the salvage value of the car. We therefore see no reason to

treat the charges related to the waiver endorsements any differently from

the basic insurance charge. Although they may be differentiated for

insurance purposes, they are in essence a single package designed to

replicate the coverage Roe should have provided himself.6

In sum, unlike late fees, NSF fees, and the like, the insurance

charges in this case benefitted both creditor and borrower by making it

easier for Roe to repay the loan in case his truck were physically damaged

or stolen. (Roe, after all, would remain liable on the note even if the

collateral were valueless.) Norwest merely passed along to Roe the exact

cost Norwest incurred in procuring insurance that restored it to the same

situation in which it would have been had Roe kept his end of the bargain.

The charges therefore are "premiums . . . attributable to insurance

guaranteeing repayment of [an] extension of credit," and under the

Comptroller's reasonable interpretation of the statute, they are not

"interest." We conclude that the events that form the basis of this cause

of action do not amount to a violation of the National Bank Act.
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III.

The District Court dismissed Roe's anti-tying allegations for failure

to state a claim on which relief could be granted. See Fed. R. Civ. P.

12(b)(6). In considering a motion to dismiss, we assume all facts alleged

in the complaint are true, construe the complaint liberally in the light

most favorable to the plaintiff, and affirm the dismissal only if "it

appears beyond a doubt that the plaintiff can prove no set of facts which

would entitle the plaintiff to relief." Coleman v. Watt, 40 F.3d 255, 258

(8th Cir. 1994). Our review is de novo. See id.

The relevant provisions of the Bank Holding Company Act Amendments

of 1970 state as follows:

(1) A bank shall not in any manner extend credit, lease or sell

property of any kind, or furnish any service . . . on the

condition or requirement--

(A) that the customer shall obtain some additional

credit, property, or service from such bank other than a

loan, discount, deposit, or trust service;

. . .

(C) that the customer provide some additional credit,

property, or service to such bank, other than those

related to and usually provided in connection with a

loan, discount, deposit, or trust service.

12 U.S.C. § 1972(1) (1994). The plaintiff in an action under this section

must show that the bank imposed a tie, that the practice was unusual in the

banking industry, that it resulted in an anti-competitive arrangement, and

that it benefitted the bank. See Alpine Elec. Co. v. Union Bank, 979 F.2d

133, 135 (8th Cir. 1992).

Roe alleged two potential ties in his complaint: when he purchased

insurance through the bank, he was required to accept an
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automatic extension of credit to pay for the insurance; and when he

purchased property damage insurance through the bank, he was also required

to purchase additional insurance that was unauthorized and undisclosed.

On appeal, Roe emphasizes that he does not suggest that the purchase of

insurance through the bank was a condition of the extension of credit for

the original loan. See Kenty, 92 F.3d at 395 (where borrower is free to

purchase insurance on open market, insurance is not tied to original loan).

Roe first complains that when he elected to purchase insurance

through the bank rather than from an independent agent--a highly debatable

characterization of the facts, but one we will entertain for purposes of

this motion to dismiss--he found that the only way he was permitted to pay

for the insurance was to have it added to his loan balance, where it bore

interest at the loan rate. But this contention is belied by the language

of the installment agreement itself, which was attached to Roe's complaint

and forms a part of the pleadings: "I MAY PREPAY MY OBLIGATIONS UNDER THIS

AGREEMENT, IN WHOLE OR IN PART, AT ANY TIME WITHOUT PENALTY." Roe's App.

at 135. It is therefore clear that Roe was not required to accept an

automatic extension of credit to pay for the insurance; he could have

tendered payment to Norwest in the amount of the insurance premium (or in

any other amount) at any time. Because Roe's complaint itself demonstrates

that this supposed tie did not exist, this allegation does not state a

claim on which relief could be granted.

The second alleged tie presents a more substantial question. Roe

here argues that when he elected to purchase property damage coverage

through Norwest, he was also required to purchase other unauthorized and

undisclosed coverages. Norwest suggests that we adopt the reasoning of the

Sixth Circuit, which held on nearly identical allegations in Kenty that

because the borrower never agreed to purchase the unauthorized insurance,

that purchase could not have been a "condition or requirement" of the

purchase of the
 We disagree with trial court decisions from within our Circuit

opining that a tie is a per se violation of § 1972. See JST

Properties v. First Nat'l Bank, 701 F. Supp. 1443, 1449 (D. Minn.

1988); Sharkey v. Security Bank & Trust Co., 651 F. Supp.

1231, 1232 (D. Minn. 1987).

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authorized insurance, as § 1972(1) requires. See Kenty, 92 F.3d at 395.

In effect, that court held that "a valid breach of contract claim cannot

be converted into an anti-tying claim." Id. We are not sure that we agree

with the reasoning of the Sixth Circuit, particularly in the context of a

motion to dismiss. Fairly read, Roe's complaint alleges that Norwest

provides property damage insurance only if borrowers also pay for other,

unauthorized insurance coverage. It therefore appears that the purchase

of the unauthorized coverage is a "requirement" of the purchase of property

damage coverage, for the latter is not available without the former. We

do not believe that the fact that the unauthorized coverage is undisclosed

should affect this portion of the analysis. Roe's complaint thus alleges

a tie and satisfies the first requirement of an anti-tying claim.

We reach the same result as the Sixth Circuit by another route,

however, for we believe Roe's complaint does not allege an anti-competitive

tie. Unlike a Sherman Act plaintiff, a plaintiff in a § 1972 action need

not show that a tie has anti-competitive effects. See, e.g., Palermo v.

First Nat'l Bank & Trust Co., 894 F.2d 363, 368 (10th Cir. 1990); Davis v.

First Nat'l Bank, 868 F.2d 206, 208 (7th Cir.), cert. denied, 493 U.S. 816

(1989); Parsons Steel, Inc. v. First Ala. Bank, 679 F.2d 242, 245 (11th

Cir. 1982); cf. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 13-

16 (1984) (Sherman Act tying plaintiff must show that defendant has market

power in tying market and that tie forecloses substantial volume of

commerce). But a § 1972 plaintiff is required to show an anti-competitive

practice, that is, "that the practice results in unfair competition or

could lessen competition." Palermo, 894 F.2d at 368 (emphasis added); see

also Davis, 868 F.2d at 208; Parsons Steel, 679 F.2d at 246.7
-15-

In this case, Roe has not alleged an anti-competitive practice. In

the market for property damage insurance (the tying market), it is

undisputed that Roe was permitted to purchase from any vendor of his

choice. Roe has alleged nothing from which a factfinder could conclude

that the tie would have any anti-competitive disruption in the tying

market. Nor can there be any anti-competitive result in the tied market,

the market for the unauthorized insurance coverage, for the simple reason

that Roe did not want to purchase such coverage from any vendor. See

Jefferson Parish, 466 U.S. at 16 ("[W]hen a purchaser is `forced' to buy

a product he would not have otherwise bought even from another seller in

the tied-product market, there can be no adverse impact on competition

because no portion of the market which would otherwise have been available

to other sellers has been foreclosed."). When these circumstances are

considered together--that is, Roe can buy basic property damage insurance

anywhere and does not want to buy other coverage at all--it is clear that

Norwest's practice cannot possibly lessen competition. It therefore cannot

be considered an anti-competitive practice. See Palermo, 894 F.2d at 368.

The District Court properly dismissed this allegation for failure to state

a claim.

IV.

Finally, we consider Roe's RICO allegations. The District Court

concluded that Roe failed to state a claim on which relief could be granted

because the application of RICO to the alleged actions of Voyager was

barred by the McCarran-Ferguson Act, 15 U.S.C. § 1012(b) (1994). We agree.

The relevant portion of the McCarran-Ferguson Act provides that "No

Act of Congress shall be construed to invalidate, impair, or supersede any

law enacted by any State for the purpose of
 Despite the apparent agreement of the parties to the contrary,

the application of the McCarran-Ferguson Act in this case does not

require a specific conclusion that the allegedly improper

activities of Voyager constituted the "business of insurance."

Fabe recognizes that the three-part test of Union Labor Life Ins.

Co. v. Pireno, 458 U.S. 119, 129 (1982), for determining whether a

particular practice constitutes the business of insurance is

relevant only in cases involving a conflict between state law and

federal antitrust law, a conflict which is the subject of a

separate provision of the McCarran-Ferguson Act. See Fabe, 508

U.S. at 504-05.

-16-

regulating the business of insurance . . . unless such Act specifically

relates to the business of insurance." 15 U.S.C. § 1012(b) (1994). The

McCarran-Ferguson Act bars the application of a federal statute if (1) the

statute does not specifically relate to the business of insurance; (2) a

state statute has been enacted for the purpose of regulating the business

of insurance; and (3) the federal statute would invalidate, impair, or

supersede the state statute. See Murff v. Professional Med. Ins. Co., 97

F.3d 289, 291 (8th Cir. 1996) (citing United States Dep't of Treasury v.

Fabe, 508 U.S. 491, 501 (1993)).8

The parties agree that RICO does not specifically relate to the

business of insurance. Nor does Roe seriously dispute Voyager's contention

that Minnesota has enacted a comprehensive statutory scheme to regulate the

business of insurance. See Minn. Stat. ch. 59A-72C (1996). The only

substantial question for our review, therefore, is whether the application

of RICO to the activities of Voyager would invalidate, impair, or supersede

Minnesota's insurance laws.

Fairly summarized, Roe's complaint contains two substantive

allegations. First, Roe alleges that Voyager contracted to function as

Norwest's automobile insurance department, sending notices to borrowers

which appeared to be from Norwest and causing
 Roe argues that our opinion in First Nat'l Bank v. Taylor, 907

F.2d 775 (8th Cir.), cert. denied, 498 U.S. 972 (1990), holds that

the McCarran-Ferguson Act is inapplicable to a national bank, and

that because he alleges that Voyager was acting as the agent of a

national bank, the Act cannot apply here. We believe Roe misreads

that case, which relies on the conclusion that the bank was

specifically authorized by the National Bank Act to undertake the

insurance-like activity that was the subject of the case. See

Taylor, 907 F.2d at 778-79. In any event, Voyager is an insurance

company and is subject to Minnesota's laws regulating insurance

companies; that it may have been working on behalf of a bank adds

nothing to this analysis.

 Evidence in the record on appeal suggests that the actual

goings-on were quite different. Norwest contracts with G.D. Van

Wagenen Company, which is not a party here, to administer the

collateral protection program by verifying whether borrowers have

provided proof of insurance and sending notices to borrowers about

Norwest's right to purchase insurance to protect its collateral.

Van Wagenen is also a Voyager agent and is authorized to place

insurance with Voyager when Norwest purchases it. An affiliate of

Norwest, Norwest Insurance, Inc., which is also not a party to this

suit, serves as the broker for the purchase of the insurance and

receives commissions from Voyager on the premiums. Nevertheless,

for purposes of this motion to dismiss, we must accept Roe's

allegations as true.

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borrowers to be charged for unauthorized insurance coverage. Second, Roe 9

claims that Voyager paid or caused to be paid to Norwest "illegal and

unauthorized kickbacks, rebates, and/or commissions" with respect to the

borrowers' collateral insurance premiums. Compl. ¶ 57. All of this

10

alleged activity, Roe claims, constitutes a massive pattern of racketeering

activity, particularly mail fraud and wire fraud, in violation of 18 U.S.C.

§ 1962(c) (1994).

Voyager argues that the allegedly fraudulent activities with which

it is charged fall squarely within several sections of Minnesota's

insurance laws. See Minn. Stat. §§ 72A.08(2) (1996) (prohibiting payment

of rebate to insured), 72A.20(1) (1996) (prohibiting misrepresentation of

terms of policy issued or to be issued), 72A.20(12)(1) (1996) (prohibiting

misrepresentation of pertinent facts or policy provisions relating to

coverages). 
-18-

Minnesota law does not provide a private cause of action for violations of

these prohibitions. See Morris v. American Family Mut. Ins. Co., 386

N.W.2d 233, 238 (Minn. 1986). Instead, the Commissioner of Commerce is

empowered to investigate violations, file charges, issue orders, and impose

fines. See Minn. Stat. §§ 72A.201(1), 72A.21, 72A.08(3) (1996). In

certain circumstances, the Commissioner may also obtain injunctive relief

against an insurer. See Minn. Stat. § 72A.25(2)-(3) (1996).

RICO, by contrast, expressly grants treble damages, costs, and

attorney fees to a victorious plaintiff. See 18 U.S.C. § 1964(c) (1994).

Voyager argues that the application of RICO in this case would impair the

operation of Minnesota's administrative remedial system by providing

private plaintiffs with a remedy Minnesota does not provide and affording

plaintiffs a recovery significantly greater than that which the state has

authorized. In particular, Voyager suggests that the possibility of treble

damages and attorney fees would eviscerate the administrative system by

diverting any rational aggrieved policyholder from the Commissioner's

office to federal court. Consequently, Voyager claims, an insurer that

found itself the subject of an inquiry by the Commissioner would be

unlikely to cooperate in the administrative process for fear of prejudicing

its litigation position if a RICO suit should arise later.

The precise degree of impairment of a state statute that is required

to trigger the operation of the McCarran-Ferguson Act is not settled. In

its only opinion to address the question directly, the Supreme Court

concluded that application of the federal securities laws to a merger of

insurance companies would not impair the state's laws protecting

policyholders. See SEC v. National Securities, Inc., 393 U.S. 453, 463

(1969). The Court noted that "Arizona has not commanded something which

the Federal Government seeks to prohibit" but also recognized that the

federal interest was directed toward protecting shareholders, while the

state
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statute was directed toward protecting policyholders. See id. The Court

concluded, "[i]n these circumstances, we simply cannot see the conflict."

Id. In the case at bar, Minnesota has not commanded anything which RICO

would prohibit; in other words, there is no direct conflict between federal

and state law. But, in contrast to National Securities, the federal and

state statutes at issue here are directed toward the same end: the

protection of policyholders and prospective policyholders from fraudulent

insurance practices. The issue presented here, therefore, is whether a

federal statute that is essentially parallel in substance to a state

statute may impair the state statute because of a difference in the

availability and the magnitude of the remedies they provide.

Several courts addressing this question have concluded that the

McCarran-Ferguson Act is not implicated by federal law that is

substantively parallel to state law. See Villafane-Neriz v. FDIC, 75 F.3d

727, 736 (1st Cir. 1996) (Federal Deposit Insurance Act); Nationwide Mut.

Ins. Co. v. Cisneros, 52 F.3d 1351, 1363 (6th Cir. 1995) (Fair Housing

Act), cert. denied, 116 S. Ct. 973 (1996); Merchants Home Delivery Serv.,

Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1492 (9th Cir.) (RICO), cert.

denied, 116 S. Ct. 418 (1995); NAACP v. American Family Mut. Ins. Co., 978

F.2d 287, 295-97 (7th Cir. 1992) (Fair Housing Act), cert. denied, 508 U.S.

907 (1993); Thacker v. New York Life Ins. Co., 796 F. Supp. 1338, 1342-43

(E.D. Cal. 1992) (RICO). Other courts have disagreed, concluding that the

intrusion of RICO's substantial damage provisions into a state's insurance

regulatory program may so impair the state law as to bar application of

RICO. See Kenty, 92 F.3d at 392 (collateral protection insurance case;

distinguishing Nationwide); Ambrose v. Blue Cross & Blue Shield, 891 F.

Supp. 1153, 1165-68 (E.D. Va. 1995), aff'd, 95 F.3d 41 (4th Cir. 1996)

(unpublished per curiam); Everson v. Blue Cross & Blue Shield, 898 F. Supp.

532, 544 (N.D. Ohio 1994); Wexco Inc. v. IMC, Inc., 820 F. Supp. 194, 203-

04 (M.D. Pa. 1993); LeDuc v. Kentucky Cent. Life Ins. Co., 814 F. Supp.

820,
 Although Murff contains language suggesting that impairment

will exist only in the case of a direct conflict between state and

federal law, that language is certainly dictum in light of the

Court's conclusion that application of the ADEA would have a de

minimis effect, at most, on the insolvency proceedings. See Murff,

97 F.3d at 292 (citing Missouri statute giving policyholders

priority over claims of employees). In addition, the ADEA, like

the federal securities laws, is designed to protect parties other

than policyholders. Murff therefore fits well within the framework

of National Securities, see 393 U.S. at 463, and does not control

here.

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829 (N.D. Cal. 1992); Senich v. Transamerica Premier Ins. Co., 766 F. Supp.

339, 341-42 (W.D. Pa. 1990) (collateral protection insurance case).

We find the latter line of cases more persuasive in the RICO context.

As one court has noted, "the remedies available under RICO are among the

most severe ever enacted in a federal civil statute." Ambrose, 891 F.

Supp. at 1166. The state of Minnesota has determined that its insurance

market can best be regulated by the Commissioner's pursuit of fines and

injunctive relief. Congress has expressed its intention to leave the

regulation of the business of insurance to the states unless a federal

statute expressly addresses that subject or the application of a general

federal statute would not invalidate, supersede, or impair a state statute.

Were the question presented here, we might agree with the Sixth and Seventh

Circuits that the federal civil rights statutes do not impair state

insurance regulation. Cf. Murff, 97 F.3d at 292 (application of Age

Discrimination in Employment Act to insolvent insurance company does not

impair state insurance insolvency procedures). But Voyager makes a

11

compelling case that the extraordinary remedies of RICO would frustrate,

and perhaps even supplant, Minnesota's carefully developed scheme of

regulation. We do not read the term "impair" so narrowly as to permit the

conclusion that the McCarran-Ferguson Act does not apply in the

circumstances presented here. See Webster's Third New International

Dictionary 1131 (1981) (defining "impair" as
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"diminish in quantity, value, excellence, or strength; do harm to"). The

District Court correctly held that Roe's RICO allegations failed to state

a claim.

V.

The judgment of the District Court is affirmed.

HEANEY, Circuit Judge, concurring and dissenting.

I concur in Sections III and IV of the court's opinion. I disagree,

however, with the conclusions reached in Section II. I believe the

district court erred in granting summary judgment on the question of

whether the payments that were made were premiums rather than interest

payments. I think this question can only be decided after an evidentiary

hearing by the district court and that we should remand to the district

court to hold such a hearing. If the district court decides after an

evidentiary hearing that the payments are interest payments in whole or in

part, then it must determine whether the payments were usurious. In

reaching this decision, I believe it is clear that the rate of interest

should be computed over the life of the loan rather than over the life of

the agreement.

A true copy.

Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.