On April 22, 2024 (almost 2 months before Judge Daniel Domenico issued a preliminary injunction against the UCCC Administrator and Colorado Attorney General), Administrator Martha Fulford issued an Interpretive Opinion Letter regarding the Colorado opt-out law (to be codified on its effective date of July 1, 2024 as C.R.S. Section 5-13-106) (the “Colorado Opt-out Law”).

The Colorado Opt-out Law states, as follows:

In accordance with section 525 of the Federal “Depository Institutions Deregulation and Monetary Control Act of 1980”, Pub. L. 96-221, the General Assembly declares that the State of Colorado does not want the amendments to the “Federal Deposit Insurance Act”, 12 U.S.C. 1811 et seq.; the Federal “National Housing Act”, 12 U.S.C. sec. 1701 et seq.; and the “Federal Credit Union Act”, 12 U.S.C. sec. 1757, made by sections 521 to 523 of the Federal “Depository Institutions Deregulation and Monetary Control Act of 1980”, Pub. L. 96-221, prescribing interest rates and preempting state interest rates to apply to consumer credit transactions in this state. The rates established in articles 1 to 9 of this title 5 control consumer credit transactions in this state. (Emphasis added)

Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”) states that Sections 521-523 of DIDMCA (which gives state-chartered, FDIC-insured banks, savings and loan associations and credit unions usury parity with national banks) will not apply to any state which after April 1, 1980 enacts a law which states expressly that it does not want Sections 521, 522 and/or 523 of DIDMCA to “apply with respect to loans made in such State.” (Emphasis added)

After reciting the above paragraphs quoting the relevant Colorado and Federal statutes, the Administrator states:

The Administrator interprets § 5-13-106 to apply only to consumer credit transactions “made in” Colorado in accordance with Section 525 of DIDMCA. Section 5-13-106 specifically cites Section 525 and expresses an intent to be “in accordance with” that section. The Administrator understands and interprets § 5-13-106’s language of “in this state” to be wholly congruent and identical with the opt out authorized by Section 525 for loans “made in” the state.

On page 23 of the opinion granting the preliminary injunction, Judge Domenico held as follows:

“The plain meaning of [Section 525 of DIDMCA] is that what state a loan is “made in” depends on where the bank is located and performs its loan- making functions and does not depend on the location of the borrower. The plaintiffs have therefore made a strong showing that they are substantially likely to succeed on the merits of their claim that Colorado cannot opt out of the federal preemptive interest-rate caps as to loans that plaintiffs’ member banks make outside of Colorado, even if those loans are made to Colorado borrowers.”

The Administrator states that the language “in this state” in the Colorado Opt-out Law must be read to be congruent with the language of Section 525 of DIDMCA “made in such state.” In light of Judge Domenico’s opinion and the Administrator’s acknowledgment that where a loan is “made” for purposes of the Colorado Opt-out Law should be interpreted consistently with where a loan is “made” under Section 525 of DIDMCA, we urge the Administrator to amend the interpretive letter or issue a new interpretive letter saying that unless and until the injunction is dissolved, the Administrator will, from an enforcement standpoint, interpret the scope of the Colorado Opt-out Law to be consistent with Judge Domenico’s opinion.