Oregon Poised to Join Colorado in Challenging Federal Banking Regulations

Oregon is on the verge of enacting legislation that could reshape the landscape of consumer lending within its borders, following a controversial Tenth Circuit Court ruling. On March 6, 2026, the Oregon legislature passed House Bill 4116 (H.B. 4116), which aims to limit the interest rates charged by out-of-state, FDIC-insured, state-chartered banks on consumer loans of $50,000 or less. The bill now awaits Governor Tina Kotek’s signature, and she is expected to approve it, with the law taking effect on June 4, 2026.

The Core of the Dispute: DIDMCA and Interest Rate Exportation

The debate centers around the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). DIDMCA generally allows state-chartered banks to lend nationwide at either their home state’s interest rate caps or a federal interest rate cap – whichever is higher. The federal cap is one percent above the prevailing Federal discount rate. However, Section 525 of DIDMCA allows states to “opt out” of this federal preemption for loans “made in” the enacting state.

Colorado’s Rate Opt-Out and the Tenth Circuit Ruling

Colorado previously passed a similar law, House Bill 23-1229, in 2023, sparking a legal challenge. The central question in the case of National Association of Industrial Bankers v. Weiser was whether Colorado’s law violated DIDMCA. The District Court of Colorado initially issued a preliminary injunction preventing enforcement of the law, reasoning that “loans made in” referred only to loans made by banks physically located in Colorado.

However, the Tenth Circuit Court of Appeals reversed that decision in a 2-1 ruling, determining that a loan is “made” both in the state where the bank is located and the borrower’s state. This means Colorado’s usury limits would apply to loans made to Colorado borrowers by out-of-state banks. A petition for rehearing en banc is currently pending, and the District Court’s injunction remains in effect. The Office of the Comptroller of the Currency and the FDIC have both filed amicus briefs urging the Tenth Circuit to reconsider its ruling. American Bankers Association filed a coalition amicus brief as well.

Oregon’s Legislation: A Mirror Image?

Oregon’s H.B. 4116 mirrors Colorado’s approach, seeking to cap interest rates at 36% for consumer finance loans made to Oregon residents by out-of-state, state-chartered banks. Supporters argue this will protect consumers from predatory lending practices. However, the law will not affect national banks, which operate under different regulations stemming from the National Bank Act, specifically Section 85, allowing them to charge rates permitted in their home state.

Potential Fallout and Federal Intervention

The legal viability of Oregon’s law, like Colorado’s, is questionable given the Tenth Circuit’s ruling. If the Tenth Circuit upholds its decision, other states may follow suit. However, a federal response is similarly brewing. The “American Lending Fairness Act of 2026,” introduced in Congress by Senator Moreno and Congressman Davidson, aims to reverse the Tenth Circuit’s decision, prevent future state opt-outs from DIDMCA as applied to out-of-state state-charted banks, and effectively nullify legislation like Oregon’s H.B. 4116.

In anticipation of further legal challenges, some state-chartered banks involved in interstate lending may consider converting to national bank charters to avoid the uncertainties created by these state-level opt-out laws.

Other States Considering Similar Measures

Currently, Iowa and Puerto Rico, in addition to Colorado, have opted out of Section 521 of DIDMCA. Rhode Island recently introduced opt-out legislation, which is currently under review. Several other states have considered similar legislation in recent years, but none have been enacted. Historically, some states have even repealed opt-out legislation after initially enacting it.