10th Circuit Reverses Injunction of Colorado Interest Rate Opt-Out Law

The U.S. Court of Appeals for the Tenth Circuit has reversed a trial court’s preliminary injunction, which had prevented Colorado officials from enforcing the state’s statutory interest rate cap on out-of-state banks lending to Colorado residents.  

The federal government sets a national interest rate standard for state-chartered banks, but states may opt out for loans “made in such State.”  Colorado recently opted out, and imposed interest rate caps on loans to Colorado borrowers on the theory that such loans are “made in” Colorado, even if the bank is not located in Colorado.  Plaintiff banking trade associations filed a lawsuit, arguing that the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) only allowed states to opt-out and impose the cap for banks located in Colorado, relying in part on longstanding regulatory interpretations concerning where a loan is made.  The trial court agreed.  The Colorado officials appealed, and the Tenth Circuit reversed, holding that “a loan is ‘made in’ the opt-out state if either the borrower or the lender is located in that state.”