FDIC, OCC Warn Oregon Law Could Upend Interstate Lending
By CU Today Staff —
PORTLAND, Ore.— The FDIC and Office of the Comptroller of the Currency have sided with banking and lending groups seeking to block an Oregon law that applies the state’s interest-rate limit to certain loans made by out-of-state, state-chartered banks, Ballard Spahr’s Consumer Finance Monitor reported.
In separate federal court briefs, the regulators argued Oregon exceeded the authority Congress gave states to opt out of federal rate-exportation rules and could create widespread uncertainty for interstate lending, Consumer Finance Monitor explained.
Oregon House Bill 4116, which took effect June 5, generally applies the state’s 36% cap—or a rate 30 percentage points above the applicable Federal Reserve discount rate, whichever is higher—to consumer finance loans of $50,000 or less involving qualifying Oregon borrowers. The National Association of Industrial Bankers, Online Lenders Alliance and American Financial Services Association sued and requested a preliminary injunction, arguing the state may regulate Oregon-chartered banks but not loans originated by banks located elsewhere.
The FDIC said the Depository Institutions Deregulation and Monetary Control Act of 1980 allows state-chartered, federally insured banks to use the interest rates permitted where they are located, putting them on equal footing with national banks. The agency argued that a loan is “made” where the bank performs core lending functions—not where the borrower resides—and warned Oregon’s interpretation would impose operational burdens, interfere with other states’ supervision and threaten the dual banking system.
The OCC similarly warned that Oregon’s borrower-focused standard could produce “destabilizing confusion” over permissible rates and undermine the federal framework supporting interstate lending. Fifteen Republican-led states, headed by Utah, also backed the industry challenge, arguing the law intrudes on other states’ authority and could drive state-chartered institutions to convert to national charters, according to an analysis by the Consumer Finance Monitor.
Originally reported by CU Today.