Industry Groups, Regulators, Experts, and States Rally Behind Challenge to Colorado Interest Rate Law

A growing coalition of banking organizations, regulators, business groups, academics, and state attorneys general is urging the U.S. Court of Appeals for the Tenth Circuit to overturn Colorado’s attempt to apply its interest rate caps to loans made by out-of-state, state-chartered banks.

The dispute centers on Colorado’s decision to opt out of a provision of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), which generally allows state-chartered banks to export the interest rates permitted in their home states when lending across state lines. At issue is whether Colorado’s opt-out authority extends to loans originated by banks located outside the state.

In recent weeks, the FDIC, U.S. Chamber of Commerce, 21 state attorneys general, major banking trade associations, and consumer credit scholars have filed amicus briefs supporting a challenge to Colorado’s law. Collectively, the filings argue that Congress enacted DIDMCA to place state-chartered banks on equal footing with national banks and that allowing Colorado to impose its rate caps on out-of-state lenders would undermine that objective.

The briefs also warn that Colorado’s interpretation could create a patchwork of state-specific lending rules, increasing compliance burdens for interstate lenders and potentially disrupting online lending, credit card programs, and bank-fintech partnerships. Several filings argue that a borrower’s location should not determine where a loan is “made,” contending instead that loans are made where a bank performs its core lending functions, including approving and funding credit.

Supporters of Colorado’s law maintain that states should be able to enforce their consumer protection and usury laws for residents within their borders. However, opponents argue that permitting one state to regulate loans originated by banks chartered elsewhere would create uncertainty for interstate lending and weaken the dual banking system that Congress sought to preserve.

The Tenth Circuit’s eventual ruling is expected to have significant implications for state-chartered banks, fintech partnerships, and consumer credit markets nationwide.