On November 10, the Tenth Circuit reversed the district court’s preliminary injunction in the challenge to Colorado’s H.B. 23‑1229, holding that Colorado may enforce its Uniform Consumer Credit Code (UCCC) interest‑rate caps for loans to Colorado borrowers even when originated by out‑of‑state, state‑chartered banks. Interpreting the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) § 525’s opt‑out phrase “loans made in such State,” the court concluded it encompasses loans in which either the lender or the borrower is located in the opt‑out state. Because Colorado has opted out, § 1831d no longer preempts Colorado rate caps for loans from out‑of‑state state banks to Colorado residents, and the preliminary injunction “falls apart.”

Background
As discussed here, Colorado enacted H.B. 23‑1229 to opt out of DIDMCA §§ 521–523 and limit charges on consumer loans. In July of 2024, a district court preliminarily enjoined Colorado from enforcing its caps against out‑of‑state state banks based on industry plaintiffs’ arguments that, under DIDMCA, a loan is “made” where the lender is located or performs non‑ministerial loan functions (and not where the borrower resides). Troutman Pepper filed an amicus brief supporting affirmance on behalf of all fifty state bankers associations and D.C., emphasizing competitive parity and the dual banking system.

The Tenth Circuit’s Holding
Writing for the panel, Judge Phillips held that “loans made in such State” under § 525 refers to loans “in which either the lender or the borrower is located in the opt-out state.”  On that reading, Colorado’s opt‑out removes § 1831d’s preemptive force for loans from out‑of‑state, state-chartered banks to borrowers located in Colorado, eliminating the basis for the injunction. The court also held the trade associations have a viable Ex parte Young equitable cause of action to seek prospective relief (rejecting arguments that DIDMCA forecloses such suits) but reversed on the merits and on the balance‑of‑equities/public‑interest factors.  Unless appealed, the case will now be remanded for further proceedings.

Concurring/Dissenting Opinion
Judge Rossman concurred in part and dissented in part. The Judge agreed the plaintiffs stated a viable Ex parte Young claim but would have affirmed the preliminary injunction on the basis that the best reading of § 525 is that a loan is “made” in the lender’s state — where the bank is chartered or performs non‑ministerial loan functions — consistent with DIDMCA’s purpose of achieving competitive parity for state‑chartered banks.

Practical Implication

  • Barring an appeal, Colorado may apply its UCCC interest‑rate caps to loans made to borrowers located in Colorado without regard to the DIDMCA rate authority for state-chartered banks.
  • National banks remain governed by National Bank Act § 85 (which has no opt‑out), so parity concerns between state and national charters persist.
  • We expect that the plaintiffs will seek an appeal to the Supreme Court.
  • State chartered banks operating across state lines in opt out jurisdictions should reassess rate authority and additional state law requirements for those jurisdictions.

We will continue to monitor the case on remand and any further developments affecting DIDMCA opt‑outs and interstate lending.