National Association of Industrial Bankers v Weiser

DIDMCA authorized state-chartered banks to charge interest at a rate permissible in the state “where the bank is located.” At the same time, Congress allowed states to “opt out” from the preemptive effect of this provision, in part, by enacting a law that “states explicitly and by its terms that such State does not want this section to apply with respect to loans made in such State.” In 2023, Colorado enacted HB1229 to add Colo. Rev. Stat. § 5-13-106 and exercise this opt-out authority.

In March 2024, several trade associations sued Colorado and sought a declaratory judgment that the state’s rate opt-out law did not impact the rates at which their state-chartered bank members located outside of Colorado could charge Colorado residents. The trades also moved for a preliminary injunction, which the district court granted in June 2024. Judge Daniel Domenico of the United States District Court for the District of Colorado ruled that a loan is made where the lender is located and performs its lending functions, not where the borrower resides.

On appeal, the FDIC filed an amicus brief supporting Colorado and argued that the district court’s interpretation conflicts with DIDMCA’s text, structure, purpose, and history. In contrast, ABA filed a coalition amicus brief urging the Tenth Circuit to affirm the preliminary injunction. ABA argued that DIDMCA’s legislative history supports the district court’s conclusion that a loan is made where the lender is located and conducts its lending activities.

In a 2-1 decision, the Tenth Circuit reversed the preliminary injunction and held that, under Section 525 of DIDMCA, a loan is “made in” an opt-out state when either the lender or borrower is located there. The trades subsequently petitioned for an en banc rehearing, arguing that the decision creates a circuit split and conflicts with Supreme Court and Tenth Circuit precedent by applying a presumption against preemption despite DIDMCA’s express preemption provision.

The FDIC and OCC supported rehearing through amicus briefs, contending that the ruling misinterprets DIDMCA, threatens interest-rate exportation and competitive parity, and creates uncertainty for interstate lending. ABA also filed another amicus brief arguing, among other things, that en banc review is warranted because the panel misread Section 525’s text, context, and legislative history.

In its most recent amicus brief, ABA reiterated its four main arguments. First, ABA argued that Congress intended a loan to be “made” only in the state where the lender performs its lending functions under Section 525, emphasizing the three-judge panel incorrectly treated the terms “made” and “executed” as interchangeable. In support, ABA pointed to other statutes enacted by the same Congress, including Section 529 of the National Housing Act, which expressly applied to loans “made or executed” in a state. These statutes show that Congress knew how to be explicit on this issue when it intended to do so. Because Congress used only the term “made” in Section 525, ABA maintained that Section 525 focuses on the lender’s location rather than the borrower's.

Second, ABA argued that DIDMCA’s legislative history supports the district court’s conclusion that where a loan is made under Section 525 depends on where the lender is located and where the lender performs loan-making functions. ABA explained that Congress enacted DIDMCA to place state-chartered depository institutions on equal footing with national banks by granting them the same interest-rate authority under the National Bank Act. Even more so, Congress included Section 525’s opt-out provision only to allow states to reimpose usury limits on their own state-chartered institutions, not to regulate interstate loans made by out-of-state lenders. At bottom, nothing in the legislative history suggests that Congress intended opt-out states to restrict rates charged by out-of-state state banks, as such a reading would undermine Congress’s goal of parity because national banks could continue exporting their home-state rates.

Third, ABA argued that a ruling that a loan is “made” in the state where the borrower is located will create an administrative morass:  such a rule would require state-chartered depository institutions to determine a borrower’s location each time the borrower uses a credit card or obtains an online loan and then apply the appropriate state’s interest-rate laws. Borrowers often travel, make online purchases, use mobile devices, and receive loan approvals long after submitting applications, making it difficult for lenders to know where borrowers are when credit is extended. This approach could force lenders to apply multiple interest-rate plans to a single account while imposing compliance burdens that national banks would not face.

Finally, ABA argued that the FDIC has long recognized that a state’s opt-out cannot affect state banks located in other states. ABA cited a 1983 FDIC interpretive letter stating that state banks may rely on their home-state interest-rate authority when lending to residents of both their own states and states that have opted out of DIDMCA’s preemption provisions. ABA added that, in the Greenwood Trust litigation, the FDIC took the same position and explained that a state’s opt-out does not affect loans made by banks located outside the opt-out state. Taken together, the FDIC has consistently interpreted Section 525 as preventing opt-out states from applying their lending laws to loans made by out-of-state state banks solely because the borrower resides in the opt-out state.