On February 26, the FDIC withdrew its amicus brief in the 10th Circuit Court of Appeals challenging Colorado’s 2023 opt-out law which aimed to restricting higher-cost online lending. The FDIC’s decision follows a shift in the agency’s leadership and marks a departure from the previous administration’s position supporting Colorado’s interpretation of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA).
Colorado’s opt-out law invokes a provision of DIDMCA that allows states to exclude themselves from the federal interest rate exportation framework, which enables banks to lend nationally at rates permitted by their home states. The law seeks to apply Colorado’s interest rate caps—some as low as 15%—to all loans made to Colorado residents, including those issued by out-of-state banks in partnership with fintech firms.
A coalition of industry groups challenged the law, arguing that Colorado is overstepping its authority by attempting to regulate lending that occurs outside the state. In June 2024, a federal district court sided with the industry groups, ruling that a loan is made where the lender performs its loan-making functions rather than where the borrower is located. The court issued a preliminary injunction preventing Colorado from enforcing the law against out-of-state lenders.
The FDIC initially supported Colorado’s position, arguing in its amicus brief that, for purposes of DIDMCA’s opt-out provision, a loan can be considered “made” where the borrower is located. However, citing a recent change in administration, the agency withdrew its brief before the Tenth Circuit could hear oral arguments in Colorado’s appeal.
Putting It Into Practice: The withdrawal follows the FDIC’s transition to Republican-led leadership under Acting Chairman Travis Hill, who has signaled a more favorable stance toward bank-fintech partnerships (previously discussed here). With oral arguments set for March 18, a ruling upholding Colorado’s law could inspire similar state restrictions, while a decision favoring industry plaintiffs would reaffirm federal rate exportation rules under the DIDMCA.
