In 1980, Congress enacted the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Sections 521-523 of DIDMCA empower state banks, insured state and federal savings associations and state credit unions to charge the interest allowed by the state where they are located, regardless of where the borrower is located and regardless of conflicting state law (i.e., “export” their home state’s interest-rate authority). However, section 525 of DIDMCA gives states the authority to opt out of sections 521-523. Colorado was one of the original states to opt out, but later repealed its opt-out. Currently, only Puerto Rico and Iowa have section 521-523 opt-outs in effect.

Colorado HB 1229, introduced earlier this month, has already passed the House and was the subject of a hearing before a Senate committee today. If passed, HB 1229 would limit certain charges on consumer loans and simultaneously opt Colorado out of sections 521-523 of DIDMCA once again. It would become effective upon enactment.

While the Colorado legislature may intend to limit the charges that can be imposed by out-of-state depository institutions making loans to Colorado residents, this is far from clear. Indeed, in Stoorman v. Greenwood Trust, a Colorado appellate court previously held that Colorado’s initial section 525 opt-out did not apply to credit card transactions between out-of-state state banks and Colorado residents, since the transactions were not deemed to be “made in” Colorado, as required for the opt-out to apply. 888 P.2d 289, 293-94 (Colo. App. 1994) aff’d 908 P.2d 133 (Colo. 1995) (en banc). Moreover, other federal precedent relating to interest rate exportation supports the conclusion that, so long as the bank appropriately establishes the loan program, when analyzing whether an opt-out should apply, loans are made in the out-of-state depository institution’s location, not the borrower’s state.

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Photo of Chris Capurso Chris Capurso

Chris focuses his practice on consumer financial services compliance, guiding clients through the many federal and state laws and regulations that impact consumer credit programs.

Photo of Jeremy Rosenblum Jeremy Rosenblum

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products…

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products designed to serve the needs of unbanked and under-banked consumers), bank overdraft practices and disclosures, geographic expansion initiatives, and compliance with federal and state consumer protection laws, including statutes prohibiting unfair, deceptive and abusive acts and practices (UDAAP); usury laws; the Truth in Lending Act (TILA); the Electronic Funds Transfer Act; E-SIGN; the Equal Credit Opportunity Act; and the Fair Credit Reporting Act (FCRA).

Photo of Caleb Rosenberg Caleb Rosenberg

Caleb is counsel in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small…

Caleb is counsel in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small businesses in the credit and alternative finance products industry.

Photo of Taylor Gess Taylor Gess

Taylor focuses her practice on providing regulatory advice on matters related to federal and state consumer protection, consumer finance, and payments laws, including those that apply to payment cards, lines of credit, installment loans, electronic payments, online banking, buy-now-pay-later transactions, retail installment contracts…

Taylor focuses her practice on providing regulatory advice on matters related to federal and state consumer protection, consumer finance, and payments laws, including those that apply to payment cards, lines of credit, installment loans, electronic payments, online banking, buy-now-pay-later transactions, retail installment contracts, rental-purchase transactions, and small business loans.

Photo of Jason Cover Jason Cover

Jason’s in-depth experience advising on consumer lending matters both as in-house counsel and outside advisor provides extensive industry knowledge for his financial services clients.

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As a former senior enforcement attorney with the CFPB, James provides the industry knowledge and expertise that fintechs and financial institutions require when launching new products or facing regulatory scrutiny.