On June 15, three major financial services trade associations filed suit in federal court to block Oregon’s HB 4116 from applying its 36% interest rate cap to consumer finance loans made by out-of-state, state-chartered banks. The lawsuit follows a similar challenge to Colorado’s opt-out, which remains pending before the Tenth Circuit on rehearing en banc.

The Lawsuit

The National Association of Industrial Bankers (NAIB), Online Lenders Alliance (OLA), and American Financial Services Association (AFSA) filed a complaint in the U.S. District Court for the District of Oregon seeking declaratory, preliminary, and permanent injunctive relief against Sean O’Day, Director of the Oregon Department of Consumer and Business Services (DCBS).

The complaint targets the recently amended Or. Rev. Stat. § 725.015, which purports to apply Oregon’s Consumer Finance Act, including its 36% interest rate ceiling on loans of $50,000 or less, to loans made by state-chartered banks located outside Oregon when the borrower resides or is domiciled in Oregon.

The Legal Theories

The plaintiffs raise two claims:

  • Federal Preemption. Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) expressly preempts any state law that would limit the interest rates a state-chartered bank may charge on interstate loans made from its home state. While § 525 of DIDMCA allows a state to opt out of § 521 “with respect to loans made in such State,” the plaintiffs argue, consistent with the Colorado district court’s reasoning in NAIB v. Weiser, that a loan is “made” where the bank is located and performs its lending functions, not where the borrower resides. Oregon’s opt-out can therefore limit only Oregon-chartered banks’ rate authority, not that of out-of-state banks.
  • Dormant Commerce Clause. Subsection 3(b) of HB 4116 goes a step further, triggering Oregon’s rate cap whenever a borrower makes a loan payment from an Oregon bank account, regardless of where the borrower was physically located when the loan was made. The plaintiffs argue this constitutes direct, per se invalid extraterritorial regulation of wholly out-of-state commercial transactions.

Our Take

Oregon is now one of only four jurisdictions that have opted out of DIDMCA § 521, joining Colorado, Iowa, and Puerto Rico. As we discussed in an earlier post, the Federal Deposit Insurance Corporation (FDIC) recently filed an amicus brief in the Tenth Circuit’s en banc rehearing of NAIB v. Weiser arguing that “loans made in such State” under § 525 means loans made by banks located in the opt-out state, not loans made to borrowers who happen to reside there. The FDIC’s position directly supports the preemption theory the plaintiffs are now pressing in Oregon.

The Oregon complaint notes a significant wrinkle in the legislative history: Oregon’s legislature passed HB 4116 after the now-vacated Tenth Circuit panel decision that had briefly favored Colorado’s broader reading of § 525. The DCBS’s own written testimony to the Oregon Legislature relied heavily on that panel opinion, which was subsequently vacated when the Tenth Circuit granted en banc rehearing in April 2026.

The Oregon litigation tracks closely with the unresolved Tenth Circuit en banc proceedings. If the Tenth Circuit agrees with the FDIC’s interpretation that § 525 opt-outs apply only to loans made by banks located in the opt-out state, that outcome could discourage other states from pursuing similarly broad interpretations of their opt-out authority, and could be persuasive in the Oregon litigation. In the meantime, we expect Oregon to oppose the plaintiffs’ challenge, including their request for a preliminary injunction.

We will continue to monitor both proceedings and provide updates as they develop.