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IV. Value of the Use of Loan Proceeds
Petitioners paid no interest on the loan. As a result, the
"amount involved" is the fair market value of the use of the loan
proceeds (i.e., as reflected by the interest rate). Petitioners
contend that the loan violates Michigan's usury laws, which
prevent a lender from recovering any interest on loans that
provide for interest at a rate that exceeds 7 percent. See Mich.
Comp. Laws Ann. sec. 438.31 and .32 (1978). Petitioners further
contend that the fair market value of the use of the loan
proceeds is zero. Respondent contends that the Court should
conclude that the Employee Retirement Income Security Act of 1974
(ERISA), Pub. L. 93-406, 88 Stat. 829, preempts Michigan's usury
laws and that the "amount involved" should be calculated using a
10.5-percent interest rate.
We reject petitioners' contentions. Petitioners contend
that the fair market value of the use of the loan proceeds equals
what a third-party buyer of the usurious loan would assign to the
loan's stated interest. This value should be based, however, on
a hypothetical loan between a willing lender and a willing
borrower rather than a hypothetical sale of the loan to a third-
party buyer.
We agree with respondent that the fair market interest rate
is 10.5 percent, but we reject his reasoning. A hypothetical
lender would not lend money to a hypothetical borrower at a rate
less than the fair market interest rate. The usury laws,
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