S&C Client American Fintech Council Obtains Preliminarily Injunction of Colorado Interest-Rate Cap Statute

The U.S. District Court for the District of Colorado preliminarily enjoined the enforcement of a Colorado law that would have applied Colorado interest rate caps to loans made by state-chartered banks-including banks located outside of Colorado-to Colorado consumers for certain credit products. The June 19 ruling, which decided an issue of first impression, specifically prevents Colorado from applying its interest-rate caps to state-chartered banks that are located and perform key loan-making functions outside of Colorado. Those banks will remain subject to their home state interest caps or the federal funds rate plus 1%. The decision will have significant implications for states attempting to apply their interest-rate caps to banks located outside of their borders.

The issue arose because of Colorado's "opt out" of a provision of the federal Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) that expressly preempts state interest rate caps. On March 25, the American Fintech Council, represented by S&C, along with the National Association of Industrial Bankers and the American Financial Services Association sued the Colorado officials charged with enforcing the law. Colorado argued that the opt-out provision allowed it to apply its interest rate caps to loans made to Colorado borrowers from state-chartered banks outside Colorado. The plaintiffs argued that DIDMCA opt-out does not extend that far.

The S&C team representing the American Fintech Council included Matthew Schwartz, Morgan Ratner, and Leslie Arffa.