Consumer Financial Services Industry Trade Groups File Lawsuit Asking Court to Strike Down Colorado DIDMCA Opt-Out

Last year, the Colorado legislature passed, and Governor Jared Polis signed into law, Colorado HB23-1229, which opted the state out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), This provision allows state-chartered banks to export interest rates in the same way that national banks can. The legislation was originally created more than four decades ago to increase state-charted banks’ ability to compete with their national counterparts.

Now, three trade organizations—the American Financial Services Association, the American Fintech Council, and the National Association of Industrial Bankers—have filed a lawsuit in federal court challenging the statute. According to a press release, they say that it “violates federal law by imposing interest-rate and fee caps on loans made to Colorado residents by state-chartered banks, including banks outside Colorado.”

If allowed to move forward, the law is scheduled to take effect on July 1 this year.

“HB23-1229 is likely to have the opposite effect of what its supporters intend,” said Frank Pignanelli, executive director of the National Association of Industrial Bankers. “Because the law’s interest rate caps apply only to state-chartered banks, national banks will be able to continue charging the rates permitted under federal rules. As state-chartered banks are forced to reduce their participation in the Colorado market, the national banks will have less incentive to keep a lid on their rates and otherwise provide credit to underserved populations.”

“Consumers deserve safe, affordable, and responsible financial options to determine what best serves their needs,” said Phil Goldfeder, CEO of the American Fintech Council. “This ill-conceived new law will harm Colorado families, particularly those in minority and rural communities, and put state-chartered banks at a disadvantage. AFC’s diverse members represent a cross-section of responsible fintech companies and innovative banks that embrace transparency and have democratized financial services by creating critical access to financial services for families who need it most.”

“This proposal, if enacted, creates a host of unintended consequences that unfairly penalize and harm Colorado consumers who need greater financial flexibility, not less,” said Bill Himpler, president and CEO at the American Financial Services Association. “AFSA’s members provide responsible, affordable credit products to a wide range of consumers, including millions of consumers with less than perfect credit who deserve access to credit products that give them the financial tools they require in these uncertain economic times.”

The lawsuit’s defendants are Phil Weiser, Colorado Attorney General, and Martha Fulford, Administrator of the Colorado Uniform Consumer Credit Code. A copy of the complaint is available here.