The American Bankers Association and Consumer Bankers Association last week filed an amicus brief in support of a lawsuit brought against Colorado challenging a new law capping interest rates and fees on loans to state residents made by state-chartered banks, no matter where the bank is located.
The National Association of Industrial Bankers and two other trade groups sued Colorado in March after the state legislature passed a law opting out of the federal Depository Institutions Deregulation and Monetary Control Act, or DIDMCA, allowing the state to establish restrictions on loans made by state-chartered banks. Colorado alleges the law applies to banks not only within its borders, but those chartered in other states. In their lawsuit, the plaintiffs argued that the law undermined community banks as it doesn’t apply to federally chartered banks.
The FDIC last month sided with Colorado. In their amicus brief, ABA and CBA expressed concern with the agency’s rationale that the location of the borrower matters for enforcement of state law, rather than the location of the lender. Such a precedent would “create massive uncertainty for all federally insured depository institutions, subjecting them to multiple and inconsistent state laws,” the associations said. They also said the Colorado law would place state-chartered banks at a “severe disadvantage” with federally chartered institutions when lending. “That competitive inequality would fly in the face of the express and overriding congressional intent to create parity between all federally insured depository institutions and national banks when Congress enacted Sections 521-523 of the DIDMCA,” they said.
