Yesterday, the State of Utah, joined by the attorneys general of Alabama, Arkansas, Florida, Georgia, Iowa, Louisiana, Mississippi, Montana, Nebraska, Oklahoma, South Carolina, South Dakota, Texas, and West Virginia, filed an amicus brief in support of the plaintiffs’ motion for a preliminary injunction in the pending challenge to Oregon House Bill 4116. The lawsuit, brought by the National Association of Industrial Bankers, the Online Lenders Alliance, and the American Financial Services Association, contends that HB 4116 is preempted by Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”).

This litigation concerns the scope of DIDMCA’s opt-out provision in Section 525. The same issue is pending before the en banc Court of Appeals for the Tenth Circuit in a challenge to a Colorado statute opting out of Section 521 of DIDMCA pursuant to Section 525. The states’ amicus brief focuses on the consequences that Oregon’s law would have for state-chartered banks, state banking regulators, and the dual banking system itself.

States Emphasize the Importance of the Dual Banking System

The amici frame the dispute as implicating the core structure of the U.S. banking system: the coexistence of state- and federally chartered institutions.

They note that many states, including Utah, have adopted policies aimed at preserving competitive parity between state and national banks and maintaining the dual banking system. In their view, Congress pursued the same objective in DIDMCA, which was enacted in 1980 in the wake of the 1978 Supreme Court ruling in Marquette National Bank v. First of Omaha Service Corp., a decision confirming that national banks may export interest rates permitted by their home states.

DIDMCA responded by extending comparable interest-rate authority to state-chartered insured banks, thereby preventing them from being placed at a competitive disadvantage relative to national banks.

Against that backdrop, the amici argue that Oregon’s interpretation of DIDMCA would disrupt the balance Congress struck between state and federal banking regimes.

DIDMCA, Marquette, and the Opt-Out Framework

The states’ argument on statutory interpretation centers on a narrow reading of DIDMCA’s opt-out provision.

They contend that Section 525 permits a state to opt out only with respect to state banks chartered and located within that state, not state banks chartered in other jurisdictions. In their view, Oregon’s HB 4116 exceeds that authority by attempting to regulate interest rates on loans made by out-of-state, state-chartered banks.

The brief ties this conclusion to the statutory and historical context of DIDMCA. It emphasizes that Marquette established the baseline rule that a loan is made at the location of the lending institution, not the borrower. Congress legislated against that backdrop when it enacted DIDMCA, and the amici argue it did not intend the opt-out provision to allow one state to regulate the lending activities of state banks chartered and supervised by another state.

On this reading, the phrase “loans made in such State” refers only to loans made by banks located in the opt-out state, not loans merely involving in-state borrowers or payment activity.

Interference with State Banking Supervision

The brief also argues that Oregon’s law would complicate state regulators’ oversight of their own chartered institutions.

State banking agencies, the amici explain, supervise banks on a consolidated basis, including loan portfolios, capital adequacy, and loss reserves. A regime in which each state could impose its own interest-rate restrictions on out-of-state state banks would create a fragmented compliance environment that would spill over into supervisory practice.

According to the states, this patchwork would make it more difficult for regulators to assess safety and soundness and could ultimately affect depositors, shareholders, and customers of state-chartered institutions.

Sovereignty and Dormant Commerce Clause Concerns

The amici also raise constitutional concerns beyond preemption.

They argue that HB 4116 improperly regulates transactions occurring outside Oregon between non-Oregon banks and their customers. The statute’s reach, they contend, is especially broad because it would apply whenever a borrower maintains an Oregon residence and uses an Oregon-based account to pay off the loan, even if the loan was made by an out-of-state state bank and the borrower was not physically present in Oregon at origination.

In the states’ view, this extraterritorial regulation intrudes on the sovereign authority of other states to regulate their own chartered institutions and raises serious Dormant Commerce Clause concerns.

Competitive Disadvantage for State-Chartered Banks

The brief further argues that HB 4116 recreates the very competitive imbalance Congress sought to eliminate in DIDMCA.

Because national banks retain interest-rate exportation authority under Marquette and the National Bank Act, Oregon’s restrictions would solely affect state-chartered banks. The amici contend that this disparity would incentivize institutions to convert to national charters to avoid Oregon’s regulatory regime.

Such a shift, they argue, would erode the dual banking system by reducing the role of state supervision.

Practical Problems Created by HB 4116

Finally, the states highlight operational difficulties associated with enforcing Oregon’s law.

Lenders, they argue, often cannot reliably determine a borrower’s domicile or whether a payment originates from an Oregon financial institution. As a result, institutions would need to continuously monitor borrower location, account activity, and payment sources to assess potential applicability of Oregon law.

The amici characterize this as an impractical compliance burden that is inconsistent with established interstate banking practices.

Our Take

The filing significantly broadens the coalition supporting the plaintiffs’ preliminary injunction motion. The attorneys general focus on state sovereignty, supervisory authority, and the structural integrity of the dual banking system.

The preliminary injunction hearing is likely to draw significant attention, as the court’s interpretation of DIDMCA’s opt-out provision could have implications far beyond Oregon. Several states have considered similar legislation aimed at limiting interest-rate exportation by out-of-state state-chartered banks, and the court’s ruling may shape the trajectory of such efforts nationwide.

We will continue to monitor the case and report on further developments.

Ballard Spahr represents the plaintiff trade associations in the Oregon case and the amici consortium of other trade associations in the Colorado case.