Oregon Defends Interest Rate Opt-Out Law Against Industry Challenge
By CU Today Staff —
PORTLAND, Ore.—Oregon is urging a federal court to reject financial industry groups’ bid to block a new state law that subjects certain consumer loans made by out-of-state, state-chartered banks to Oregon’s 36% interest-rate limit, arguing the lenders are reading restrictions into federal law that Congress did not impose, according to Law360.
The state said the industry’s interpretation would improperly restrict Oregon’s authority to opt out of federal interest-rate exportation rules under the Depository Institutions Deregulation and Monetary Control Act of 1980, or DIDMCA.
The lawsuit was filed June 15 by the National Association of Industrial Bankers, American Financial Services Association and Online Lenders Alliance against Oregon Department of Consumer and Business Services Director Andrew Stolfi. The groups subsequently sought a preliminary injunction against House Bill 4116, arguing Oregon’s opt-out authority applies only to loans actually “made” within Oregon and cannot reach loans originated by state-chartered banks in other states simply because the borrowers live in Oregon. The groups also contend portions of the law violate the dormant Commerce Clause.
HB 4116, signed by Gov. Tina Kotek April 7 and effective June 5, is intended to close what Oregon regulators describe as a loophole that allowed online lenders working with out-of-state banks to charge Oregon borrowers rates exceeding the state’s 36% ceiling. The Oregon Division of Financial Regulation said it identified more than 31,000 loans totaling at least $61 million since 2020 that exceeded Oregon’s cap, with some carrying rates above 100% APR. The law invokes DIDMCA’s state opt-out provision and clarifies Oregon law’s application to internet lending.
The dispute closely parallels litigation over Colorado’s DIDMCA opt-out and could help determine how far states can go in restricting rate exportation by state-chartered banks. Oregon Capital Chronicle reported the Oregon plaintiffs are relying heavily on the interpretation advanced in the Colorado litigation, while the FDIC has sided with the financial industry in that dispute, arguing DIDMCA’s phrase “loans made in such State” focuses on where the bank makes the loan rather than where the borrower resides.
Originally reported by CU Today.