The Conference of State Bank Supervisors (CSBS) has endorsed federal legislation seeking to clarify the scope of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA).
The endorsement arrives as the House Financial Services Committee prepares to mark up H.R. 7866, the American Lending Fairness Act of 2026, on Wednesday, September 16, 2026, at 10 a.m. ET.
CSBS is the nationwide organisation representing state banking and financial regulators, giving its position considerable weight in the ongoing legislative and legal debate.
The core dispute centres on whether a state’s DIDMCA opt-out under Section 525 allows it to regulate loans made by out-of-state state-chartered banks simply because borrowers are located in the opt-out state.
Colorado and Oregon have advanced that broader interpretation, and the question is currently being contested in litigation pending before the Tenth Circuit and in a more recently filed case in Oregon.
Both the FDIC and the OCC have filed amicus briefs in those cases, supporting the same narrower reading of Section 525 that CSBS has now formally endorsed.
In a September 2 letter to House Financial Services Committee Chairman French Hill and Ranking Member Maxine Waters, CSBS urged Congress to pass H.R. 7866 without delay.
The letter argues that the legislation would “preserve each state’s authority to establish the rules governing its own chartered institutions” while maintaining competitive equality between state-chartered and national banks.
CSBS also cautioned that a broader reading of the opt-out provision could destabilise the dual banking system that has long defined American financial regulation.
As the letter states, “[a] state’s decision to opt out of DIDMCA should not allow it to regulate the activities of banks chartered by other states.”
CSBS further warned that such an interpretation could “undermine the competitive balance between state and national banks” and create uncertainty for banks, regulators, and consumers across the country.
Section 521 of DIDMCA permits a federally insured state-chartered bank to export the interest rate allowed by its home state when making loans across state lines, a framework that underpins much of modern interstate lending.
Section 525 then permits a state to opt out of that federal interest-rate preemption, but only for loans “made in such State,” a phrase that sits at the heart of the current legal controversy.
The plaintiffs in both the Tenth Circuit and Oregon cases argue that a loan is “made” only in the bank’s home state, meaning opt-out states cannot reach lending activity by banks chartered elsewhere.
H.R. 7866 would codify that interpretation by confirming that Section 525 was not designed to allow opt-out states to regulate interest rates charged by out-of-state banks lending to their residents.
The bill’s purpose, according to supporters, is to ensure that Section 525 applies only to institutions chartered within the opt-out state, preserving regulatory symmetry across the system.
CSBS has framed its position as one concerned with broader structural integrity rather than the interests of any individual bank or institution.
The organisation argues that one state should not gain the power to regulate banks chartered by another state simply because those banks extend credit to its residents.
Passage of the American Lending Fairness Act of 2026 would restore certainty to the DIDMCA framework and reinforce the interstate lending parity that Congress originally intended when it enacted the law.