A coalition of 11 states and the District of Columbia filed an amicus brief on July 13 supporting Colorado in a high-stakes federal appeals court case over interest-rate limits.
Two former FDIC Board members followed with their own supporting brief on July 15, adding regulatory weight to Colorado’s position in the en banc proceedings.
The case, National Association of Industrial Bankers v. Weiser, is before the U.S. Court of Appeals for the Tenth Circuit and centres on a provision of the Depository Institutions Deregulation and Monetary Control Act of 1980, known as DIDMCA.
At issue is whether Colorado’s opt-out under Section 525 of DIDMCA allows the state to apply its interest-rate caps to loans made to Colorado residents by out-of-state, state-chartered banks.
The Tenth Circuit granted rehearing en banc and vacated an earlier divided panel decision that had held a loan is “made in” a state when either the lender or borrower is located there.
The state amici brief was filed by California, Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New York, Washington, and the District of Columbia.
Those states argue they have historically applied usury and consumer protection laws to transactions involving their residents, regardless of where a lender happens to be located.
In their view, restricting Section 525 to banks physically located within an opt-out state would substantially diminish the practical value of Congress’s decision to preserve state opt-out authority.
The brief filed by former FDIC officials focuses on statutory language, with former FDIC Chairman Martin Gruenberg and former CFPB Director and FDIC Board Member Richard Cordray arguing that Section 525’s reference to “loans made in” a state differs intentionally from Section 521’s reference to the state where a bank is “located.”
Gruenberg and Cordray also contend that the FDIC’s current litigation position is inconsistent with earlier agency interpretations that recognised that distinction between the two sections.
Both briefs argue that any remaining ambiguity should be resolved in favour of preserving state authority, given that regulation of usury has traditionally fallen within the states’ police powers.
The Tenth Circuit’s eventual ruling could carry significant consequences for mortgage lenders and other creditors that rely on federal rate-exportation principles when offering loans across state lines.
Lenders operating in multiple states will need to monitor the en banc proceedings closely and assess whether their existing compliance frameworks remain appropriate under either potential outcome.