JUNE 19, 2024 – In a major victory that will help preserve access to credit for Colorado consumers who need it most, a federal judge has preliminarily enjoined a Colorado statute that would have imposed interest-rate and fee caps on loans made to Colorado residents by state-chartered banks located outside Colorado.
Three leading financial services trade organizations—the National Association of Industrial Bankers, the American Financial Services Association, and the American Fintech Council—sued in March, asserting the Colorado statute is plainly invalid because it is inconsistent with federal law. Granting plaintiffs' motion for a preliminary injunction, U.S. District Judge Daniel D. Domenico found that the trade groups "have made a strong showing that they are substantially likely to succeed on the merits of their preemption claim."
The new law, HB23-1229, was scheduled to take effect on July 1, 2024. It was enacted as part of a campaign to curb "predatory" lending by banks outside Colorado. But as explained in plaintiffs' complaint and injunction motion, the cap on interest rates imposed by the new law applies far more broadly than Congress intended—to banks outside Colorado—and is therefore inconsistent with the federal Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and undermines the competitive position of community banks. It also won't advance the state's goals since, as the decision granting an injunction points out, Colorado's law would not have applied to national banks.
Plaintiffs' members include responsible, ethical state-chartered banks that offer a wide variety of useful, familiar, everyday credit products to Colorado consumers, including personal installment loans, "buy now, pay later" (BNPL) loans, vehicle financing, and store-branded credit cards.
The three trade organizations are represented by a team of lawyers from Davis Wright Tremaine LLP, Sullivan & Cromwell LLP, Holland & Knight LLP.
About American Financial Services Association
Founded in 1916, AFSA is the primary trade association for the consumer credit industry, protecting access to credit and consumer choice. AFSA provides the consumer credit industry and the consumers it services with a voice in Washington, D.C., where the association is headquartered, and access to the media and investment community. It also provides policy advice and issues management at both the federal and state level. Learn more at https://afsaonline.org/.
About American Fintech Council
A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative BaaS banks. Our mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies. Learn more at https://fintechcouncil.org/.
About National Association of Industrial Bankers
NAIB is a Utah-based trade association representing industrial loan companies (ILCs). ILCs, or industrial banks, have been an integral part of the U.S. financial system for over a century, providing critical access to credit opportunities for those traditionally underserved by large national financial institutions. NAIB champions innovative financial services for Americans by expanding access to credit, guaranteeing consumer choice, and providing unique banking services. Learn more at https://www.industrialbankers.org/.