## Facts

- Quik Payday, Inc., a Utah-licensed payday lender, made short-term loans through an Internet website.
- Borrowers applied online, providing identifying information and banking details; approved borrowers electronically signed contracts and received funds by electronic deposit.
- Quik Payday had no physical presence in Kansas but made hundreds of loans to borrowers who used Kansas addresses and maintained Kansas bank accounts.
- Kansas law required licensing for supervised consumer loans made to Kansas consumers; Quik Payday did not obtain a Kansas license.
- After a complaint, Kansas banking regulators initiated an administrative proceeding and issued a summary order directing Quik Payday to stop lending to Kansas residents, halt collections, pay a $5 million civil penalty, and refund interest/fees/profits from loans to Kansas consumers.
- Quik Payday filed a federal action seeking declaratory and injunctive relief, alleging that applying Kansas’s consumer-lending statute to its Internet loans violated the dormant Commerce Clause.

## Issues

1. Whether applying Kansas’s consumer-lending licensing and regulatory requirements to an out-of-state Internet lender’s loans to Kansas residents constitutes unconstitutional extraterritorial regulation under the dormant Commerce Clause.
2. Whether the burdens of compliance imposed on interstate commerce are clearly excessive in relation to Kansas’s local benefits under *Pike v. Bruce Church*.
3. Whether Internet-based lending requires nationally uniform regulation such that Kansas’s application of its statute violates the dormant Commerce Clause.

## Decision

- The Tenth Circuit affirmed summary judgment for the Kansas officials.
- The court held that applying Kansas’s statute to loans made to Kansas residents did not regulate extraterritorial conduct.
- The court held that any interstate-commerce burdens from Kansas licensing and consumer-protection requirements were not clearly excessive compared to Kansas’s interest in protecting its residents.
- The court rejected the claim that Internet commerce, standing alone, triggers a dormant Commerce Clause requirement of national uniformity barring state consumer-credit regulation.

## Legal Principles

- A state law violates the dormant Commerce Clause’s extraterritoriality doctrine when it directly regulates commerce occurring wholly outside the state or projects the state’s policy into out-of-state markets; regulating transactions directed at in-state consumers with in-state effects is generally permissible.
- Under *Pike v. Bruce Church*, a nondiscriminatory state regulation affecting interstate commerce is invalid only if the burden on interstate commerce is clearly excessive in relation to the putative local benefits.
- States retain authority to apply licensing and consumer-protection laws to out-of-state firms that extend credit to in-state residents, including through Internet channels, absent discrimination or impermissible out-of-state control.
- The dormant Commerce Clause does not create a categorical exemption for Internet businesses from generally applicable state regulation of consumer credit.

## Conclusion

The court upheld Kansas’s application of its consumer-lending statute to an out-of-state online payday lender’s loans to Kansas residents, concluding the regulation was not extraterritorial, did not fail *Pike* balancing, and was not barred by any Internet-specific national-uniformity theory under the dormant Commerce Clause.


Quik Payday, Inc. v. Stork, 549 F.3d 1302 (10th Cir. 2008)