Comptroller jumps on board to oppose state enforcing usury laws on out of state bank, fintech lending

The courts, or Congress, should remedy the outcome of a legal case decided last month that out-of-state banks and fintech partners lending to someone in Colorado must comply with state interest rate caps, the national banking regulator said Tuesday as plaintiffs in the case sought a rehearing.

In a statement, Comptroller of the Currency Jonathon Gould called for the remedy by the courts or the national legislature. He said the decision reached Nov. 10 by the 10^th U.S. Circuit of Appeals “risks undermining state banks’ ability to effectively administer multi-state lending programs and, perhaps more importantly, disadvantages state banks that wish to lend in Colorado compared to national banks and Federal savings associations.”

“Such an outcome is fundamentally inconsistent with Congress’s efforts to create competitive equality between state and federally chartered banks,” Gould said. “Courts or, if necessary, Congress should remedy this outcome.”

Gould’s comments were spurred by plaintiffs in the case requesting an extension to file a rehearing petition with the Tenth Circuit. That request, according to reports, was granted, staying the mandate until the court decides on the petition.

The comptroller’s comments revolve around the decision reached by the appeals court last month in National Association of Industrial Bankers v. Weiser. That ruling overturned an earlier district court injunction. The appeals court found that a loan is “made in” Colorado if either the lender or borrower is located there, allowing Colorado to enforce its usury laws.

Colorado enacted legislation to “opt-out” of the 1980 Depository Institutions Deregulation and Monetary Control Act (DIDMCA), which deregulated interest rate ceilings, but allowing individual states to opt out. The opt-out only affects state-chartered banks and fintechs that partner with them; national banks and federal savings associations are not affected by the state law. According to Gould, that creates a disparity between state banks and their fintech partners, and the national institutions, which he directly regulates.

Comptroller Issues Statement on 10th Circuit Decision