Another amicus brief has been filed in the Tenth Circuit’s en banc consideration of NAIB v. Weiser, this time by two prominent consumer advocacy organizations: the Center for Responsible Lending (CRL) and the National Consumer Law Center (NCLC). The brief supports the Colorado Attorney General’s interpretation of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), arguing that when a state opts out of Section 521, it may apply its usury laws to loans made by out-of-state state-chartered banks to borrowers residing in the opt-out state.

The consumer groups’ brief complements, but differs in emphasis from, the amicus brief filed by former FDIC Chairman Martin Gruenberg and former CFPB Director Richard Cordray. Whereas the Gruenberg/Cordray brief focuses heavily on statutory interpretation and the FDIC’s evolving interpretations of Section 525, the CRL/NCLC brief emphasizes the historical importance of state usury laws and Congress’s intent to preserve state authority over consumer lending.

The Consumer Groups’ Principal Arguments

The amici make four principal arguments.

First, they emphasize that regulation of interest rates has historically been one of the core police powers reserved to the states. The brief traces state usury laws from colonial America through modern consumer protection statutes and argues that Congress would not have displaced such traditional state authority absent unmistakably clear statutory language.

Second, the brief argues that the ordinary meaning of the key phrase in Section 525, “loans made in such State,” includes loans made to borrowers located in the opt-out state. According to the amici, a loan does not come into existence until both lender and borrower participate in the transaction by delivery and receipt of loan proceeds. Consequently, they assert that a loan is made where the borrower receives the funds—not solely where the lender performs underwriting or other lending functions.

Third, the amici contend that Congress deliberately used different language in Sections 521 and 525. Section 521 refers to the state where the bank is “located,” while Section 525 refers to “loans made in such State.” They argue that courts must give independent meaning to those different phrases rather than treating them as synonymous.

Finally, the brief relies heavily on DIDMCA’s legislative history, asserting that Congress intended Section 525 to permit states to restore their usury laws completely after opting out, not merely to eliminate one portion of Section 521’s federal preemption.

Heavy Reliance on Public Policy

This brief devotes substantial attention to public policy considerations.

The amici argue that modern “bank partnership” or so-called “rent-a-bank” lending arrangements allow nonbank lenders to evade state interest-rate caps by partnering with banks chartered in states having little or no usury regulation. According to the brief, accepting the banks’ interpretation of Section 525 would effectively prevent opt-out states from enforcing their own interest-rate limits against loans carrying very high annual percentage rates.

The brief also emphasizes that numerous states continue to maintain meaningful interest-rate ceilings and argues that Congress intended Section 525 to preserve each state’s ability to decide for itself whether to participate in DIDMCA’s federal interest-rate preemption regime.

Observations

The consumer groups present an historical defense of state usury authority, but the brief largely sidesteps one of the most significant obstacles to its position: the FDIC’s earliest interpretations of Section 525.

The brief cites language from the FDIC’s 2020 “valid-when-made” rulemaking as support for its reading of Section 525. However, the amici themselves candidly acknowledge that the FDIC’s interpretations of Section 525 have varied over the years and expressly state that they cite the 2020 preamble only as an “illustration of ordinary usage,” not as an authoritative agency interpretation. That concession significantly limits the persuasive value of the cited language.

More importantly, the brief makes no meaningful effort to reconcile its position with the FDIC’s earliest interpretations issued shortly after DIDMCA’s enactment.

As we explained in the amicus brief we filed on behalf of a broad coalition of national financial services trade associations supporting the plaintiffs and in our observations about such brief in our blog about it, the FDIC initially interpreted Section 525 very differently. In FDIC Interpretive Letter No. 83-16 (1983), which was issued just three years after DIDMCA’s enactment, the agency advised that an out-of-state state-chartered bank could continue exporting the interest rate permitted by its home state even when lending to residents of a state that had exercised its Section 525 opt-out. Similarly, in its 1992 amicus brief in Greenwood Trust Co. v. Massachusetts, the FDIC argued that a state’s exercise of its Section 525 opt-out “should not affect the usury preemption of section 521 for a bank not located in that State” and that Section 525 “does not confer on states that elect to opt out of Section 521 extraterritorial authority to apply their own lending laws to loans made in other states by banks chartered in other states, merely because the borrower happens to be a resident.”

Those contemporaneous interpretations are particularly significant because they were issued much closer in time to DIDMCA’s enactment than the later materials upon which the consumer groups principally rely. While the FDIC’s views have changed over time, the agency’s earliest interpretations support the plaintiffs’ position that Section 525 was never intended to prevent out-of-state state-chartered banks from exporting the interest rates permitted by their home states. See Gen. Elec. Co. v. Gilbert, 429 U.S. 125, 142 (1976) (refusing to accord deference to EEOC’s guideline which was “not a contemporaneous interpretation of Title VII” and “flatly contradicts the position which the agency had enunciated at an earlier date, closer to the enactment of the governing statute.”)

The consumer groups also emphasize Congress’s desire to preserve state authority over usury regulation. That undoubtedly was one objective of Section 525. The difficult question, however, is not whether Congress sought to preserve state authority, but how far Congress intended that authority to extend in interstate lending transactions involving state-chartered banks located elsewhere. On that question, both the statutory language and the FDIC’s contemporaneous interpretations remain the central issues before the Tenth Circuit.

The en banc court now has before it an unusually comprehensive collection of amicus briefs from virtually every perspective—including banking trade associations, former federal regulators, consumer advocacy organizations, numerous “Red States” and “Blue States,” and the FDIC and OCC. The court’s resolution of the meaning of the deceptively simple phrase “loans made in such State” will become the first appellate interpretation of Section 525 and could have significant implications for interstate lending by state-chartered banks for many years to come.