A state senator in New York introduced a bill that, if adopted, would exercise New York’s right under Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”) to opt-out of DIDMCA preemption. However, there is virtually no chance that this bill will be enacted this year.
Senator Zellnor Myrie introduced S. 10688 on August 26 (which was then referred to the Rules Committee) after the New York Legislature’s regular session had ended on June 5, 2026. The Legislature is not expected to return to Albany for the remainder of 2026. As a result, the bill will die at the end of this year.
That does not make the bill unimportant. That’s because we understand that a new identical or substantially similar bill will likely be introduced in January of next year with a new bill number after the Legislature reconvenes. As a result, S. 10688 could be viewed as a sneak preview of New York State’s impending entry into the continuing national battle over the meaning of Section 525 of DIDMCA. New York State is the fourth largest state in the country with a population of over 20 million people. The states that have opted out of DIDMCA have much smaller populations: Colorado (5.7 million), Oregon (4.2 million) and Iowa (3.2 million). If you combine those populations with the population of Puerto Rico (which has also opted out), it is way below the population of New York State. Thus, if New York were to enact this bill, it would substantially increase the risk for state banks engaged in interstate lending programs. It would also provide a strong incentive for the enactment of a federal bill pending before the House which would clarify that a state opt-out under Section 525 of DIDMCA would not impact the authority of an out-of-state state bank to export to residents of the opt-out state the interest rate permitted by the state where such bank is located. The House Financial Services Committee has scheduled a hearing for 10 am on Wednesday, September 2, to consider the Federal bill, among other topics.
What Would the Bill Do?
Section 521 of DIDMCA permits federally insured state-chartered banks to export the interest rate permitted by the law of the state where such bank is located. Section 525, however, permits a state to opt out of that federal authority with respect to “loans made in such State.”
The bill’s central feature is its expansive definition of where a loan or other consumer credit transaction is “made.” A consumer-credit transaction would be considered “made” in New York when the consumer is a New York resident when the account is opened or the transaction is consummated and at least one of the following acts relating to the transaction occurs in New York: applying for credit, accepting the agreement, receiving funds or access to credit, using the credit, receiving or activating a credit card, making payments, and servicing or collection activities. The bill expressly provides that a transaction can be “made” in more than one state, and a contractual choice-of-law provision could not override that determination.
This expansive definition of where a loan or other consumer credit transaction is “made” seems to be an exercise in futility since federal law, Sections 521 and 525, and not New York State law determines where a loan is “made.”
Credit Cards and Fintechs Would Be Affected
The proposed legislation is not limited to traditional installment loans. “Consumer credit transaction” expressly includes open-end credit, credit-card accounts, balance transfers and cash advances.
It also reaches well beyond state banks. A “covered participant” includes entities that market, solicit, arrange, facilitate, underwrite, fund, service, administer, purchase, securitize, collect or enforce covered transactions—or receive a material portion of their revenues, interest or fees from a covered transaction.
If the bill were to become law and not be preempted by Section 521 of DIDMCA, that could have significant implications for bank-fintech lending arrangements in which the bank is located outside New York.
The bill does not purport to regulate national banks or other federally chartered institutions to the extent federal law preempts state regulation. That acknowledges existing federal preemption of state usury laws by Section 85 of the National Bank Act and the fact that Sections 521 and 525 of DIDMCA apply only to state-chartered banking institutions.
Who Could Enforce the Bill and What Would the Ramifications Be for Violating it if it Becomes Law?
Either the New York Attorney General or the Superintendent of the New York Department of Financial Services may enforce it if it becomes law. They could investigate violations, subpoena records, seek injunctions, obtain restitution or refunds of unauthorized interest and fees, seek disgorgement, require corrections to account and credit-reporting information and pursue other equitable relief. Civil penalties could reach $2,500 per violation and $10,000 for each knowing or willful violation.
While private civil litigants could not enforce the bill, they could, of course, seek whatever remedies are available for usury violations.
Why Was the Bill Introduced?
The legislative memorandum accompanying the introduction of the bill states that New York consumers are currently offered credit, including credit cards, at APRs above the criminal usury ceiling of 25% through programs involving state-chartered institutions located in states that permit higher interest rates than New York.
The position of the bill’s sponsor is that the location of a bank’s headquarters or where it performs its core lending functions should not be determinative when the borrower’s involvement in a remote lending transaction (described earlier in this blog) occurs in New York. The bill specifically invokes the Second Circuit’s 2014 decision in Otoe-Missouria Tribe of Indians v. New York State Department of Financial Services, 769 F.3d 105, which recognized New York’s regulatory interest in remote lending involving New York residents.
If the Bill is Enacted It Will Face A Legal Challenge
The bill arrives while the basic legal question concerning the scope of an opt-out under Section 525 is already before the federal courts.
Colorado’s DIDMCA opt-out is being challenged before the en banc Tenth Circuit in National Association of Industrial Bankers v. Weiser. Oregon’s recently enacted opt-out also has been challenged in Federal District Court in Oregon. The central issue in both cases is whether Section 525 permits an opt-out state to impose its interest-rate restrictions on loans made to its residents by state-chartered banks located elsewhere.
The federal banking agencies and industry groups have advanced the narrower interpretation, that the key operative language of Section 525 of DIDMCA (“loans made in such State”) refers only to loans made by institutions located in the opt-out state. Consumer advocates and the states supporting Colorado and Oregon advocate the broader interpretation that looks to where the borrower receives and uses the credit.
New York’s proposed legislation essentially takes the latter position and attempts to codify it in considerable detail.
New York is currently the only new state DIDMCA opt-out effort still alive in 2026, according to information provided to us. Rhode Island’s 2026 proposed legislation has been held for further study. In 2025, Oregon and Rhode Island pursued opt-out legislation, while in 2024 proposals were introduced in Minnesota, Rhode Island and the District of Columbia, and a draft ballot initiative was considered in Nevada.
Thus, while S. 10688 has no realistic prospect of becoming law this year, it is still worth watching. If reintroduced in January with additional co-sponsors, New York could become the next major state battleground over whether states can use a Section 525 opt-out to apply their own usury laws to interstate loans made to their residents by out-of-state state banks.