WASHINGTON — Eighteen state attorneys general are urging Congress to reject legislation they say would undermine states’ authority to enforce interest-rate limits on loans made to their residents by out-of-state, state-chartered banks.
In a Nov. 9 letter to House Speaker Mike Johnson and House Minority Leader Hakeem Jeffries, the attorneys general, led by Oregon Attorney General Dan Rayfield, opposed H.R. 7866, the American Lending Fairness Act of 2026, according to reporting by Consumer Finance Monitor.
The dispute centers on a provision of the Depository Institutions Deregulation and Monetary Control Act of 1980, or DIDMCA, which generally allows federally insured, state-chartered banks to charge borrowers interest rates permitted in the banks’ home states. The law also gives states authority to opt out of certain federal interest-rate preemption rules.
What AGs Contend
The attorneys general contend Congress intended that opt-out authority to allow states to apply their own usury limits to loans made to residents, including loans originated by banks chartered elsewhere. They argue the proposed legislation would curtail that protection.
Among their concerns are bank-fintech partnerships in which nonbank lenders work with banks based in states with higher permissible rates to offer loans in states with stricter caps. The attorneys general say such arrangements can be used to circumvent state consumer protections.
The letter cites longstanding opt-outs in Iowa and Puerto Rico, as well as more recent action in Colorado and Oregon, as examples of states exercising that authority.
Dispute Over Scope of State Authority
Consumer Finance Monitor, however, disputes the attorneys general’s reading of the law. Its analysis says the opt-out provision applies only to banks chartered in the state exercising the opt-out, rather than to banks chartered elsewhere. It points to a federal district court ruling in litigation involving Colorado’s opt-out.
Under that interpretation, H.R. 7866 would clarify existing law rather than eliminate state opt-out authority. States could still restrict interest-rate exportation by their own state-chartered banks, but could not use an opt-out to impose their rate limits on out-of-state banks.
Where Measure Would Also Apply
The measure would also apply that clarification to previously enacted opt-outs, affecting states including Colorado and Oregon, according to Consumer Finance Monitor.
The disagreement reflects a broader debate over the balance between state consumer-lending protections and the federal framework allowing banks to lend across state lines. The attorneys general say Congress should preserve states’ ability to respond to high-cost lending; supporters of the narrower interpretation say states should not regulate the rates of banks chartered by other states.
