House Panel to Weigh Bill Clarifying Bank Rate Preemption
A House committee will consider legislation to resolve whether states can cap interest rates on loans from out-of-state, state-chartered banks, a key issue for interstate lenders and their FinTech partners.
The House Financial Services Committee will hold a hearing on H.R. 7866, the American Lending Fairness Act of 2026, which aims to clarify a contentious provision of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). At issue is whether a state's decision to "opt out" of federal interest-rate preemption allows it to impose its own usury caps on loans made by out-of-state, state-chartered banks to its residents.
This ambiguity has created significant legal and business uncertainty for banks and their FinTech partners, leading to litigation in multiple jurisdictions, including an en banc hearing before the Tenth Circuit. An interpretation allowing states to regulate out-of-state lenders could fragment the nationwide lending market, increase compliance costs, and potentially drive state banks to convert to national charters, thereby weakening the dual-banking system. H.R. 7866 would resolve the ambiguity by clarifying that a state's opt-out only prevents its own state-chartered banks from exporting interest rates, without affecting the ability of out-of-state banks to lend into that state. Counsel should monitor the hearing for indications of the bill's prospects, which could preempt adverse judicial rulings and provide much-needed clarity for interstate lending.