State Regulators Endorse Bill to Limit DIDMCA Rate-Cap Opt-Outs
The national group representing state banking regulators has endorsed federal legislation that would prevent states from using a DIDMCA opt-out to apply their interest-rate caps to loans made by out-of-state, state-chartered banks.
The Conference of State Bank Supervisors (CSBS) has endorsed federal legislation that would significantly clarify the rules for interstate lending by state-chartered banks. The bill, H.R. 7866, addresses a key dispute under the Depository Institutions Deregulation and Monetary Control Act (DIDMCA), specifying that a state's decision to 'opt out' of federal interest-rate preemption applies only to banks chartered within its own borders. This interpretation directly counters efforts by Colorado and Oregon to impose their local interest-rate caps on loans made by out-of-state banks to their residents. The CSBS endorsement is significant because it aligns the nation's state regulators with the FDIC, the OCC, and financial industry plaintiffs who are challenging the states' position in federal court. This broad consensus strengthens the argument against state overreach and provides momentum for a legislative solution. Counsel for financial institutions should monitor the House Financial Services Committee's planned markup of the bill, as well as the parallel litigation pending before the en banc Tenth Circuit, as the outcome will directly impact the validity of interstate lending models.