Hearing will focus on whether Section 525 permits an opt-out state to regulate loans made by out-of-state state banks

On Wednesday, September 2, the House Financial Services Committee will hold a hearing entitled “Strengthening the American Economy: Promoting Growth, Opportunity, and Prosperity.” The hearing will begin at 10:00 a.m. ET in Room 2128 of the Rayburn House Office Building. It will be streamed.

Although the hearing will address several financial-regulatory topics, the Committee’s consideration of H.R. 7866, the American Lending Fairness Act of 2026, is likely to be of particular interest to banks, FinTech companies and other participants in the nationwide lending market.

H.R. 7866, sponsored by Rep. Warren Davidson and co-sponsored by Rep. Andy Barr, would amend Section 27 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831d, to clarify the scope of the state opt-out provision in Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). The bill was introduced on March 9 and referred to the Financial Services Committee. 

The issue addressed by H.R. 7866

Section 521 of DIDMCA permits a federally insured state-chartered bank to charge interest on a loan or other extension at the rate permitted by the bank’s home state, including when the bank makes a loan or other extension of credit to a borrower in another state, whose laws are expressly preempted by Section 521, Section 525 of DIDMCA permits a state to opt out of that federal interest-rate preemption for loans “made in such State.”

The central issue is what Congress intended that opt-out to accomplish. H.R. 7866 would clarify that Section 525 was not intended to permit an opt-out state to regulate the interest rate that may be charged on a loan made by an out-of-state state bank to a resident of the opt-out state. Instead, the bill would make clear that the opt-out was intended only to prevent state-chartered banks located in the opt-out state from relying on Section 521 of DIDMCA—the provision that otherwise permits state-chartered banks to export their home-state interest rates when lending across state lines.

Under this interpretation, an opt-out would operate solely within the opt-out state’s own banking system. It would preclude state banks chartered by that state from using Section 521, but it would not authorize the state to impose its interest-rate limitations on loans made by state banks chartered in another state.

The legislation therefore addresses a fundamental question: Does Section 525 permit an opt-out state to impose its interest-rate limits on loans made by out-of-state state-chartered banks, or was the provision intended only to prevent banks chartered in the opt-out state from using Section 521?

H.R. 7866 would resolve that question in favor of the latter interpretation.

Why clarification is needed

The need for legislative clarification has become more pressing because of ongoing litigation concerning the scope of DIDMCA’s opt-out provision.

This interpretation has been adopted by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Litigation is pending before the en banc Tenth Circuit concerning whether Colorado’s opt-out permits the state to apply its interest-rate restrictions to loans made by out-of-state state-chartered banks. Similar issues are being litigated in the federal district court in Oregon. Those cases could have significant consequences for the ability of state-chartered banks to make loans nationwide and for FinTech companies that partner with those banks.

The issue also has attracted attention in New York, where an opt-out bill was just introduced in the state legislature. If enacted, that legislation could create another important test of whether an opt-out state may regulate the interest rates charged by out-of-state state banks or may only prevent its own state-chartered banks from invoking Section 521.

These developments underscore why H.R. 7866 matters. Without clarification, states may continue to take differing positions on the scope of Section 525, producing uncertainty for banks, borrowers and bank-FinTech lending partnerships. A state-by-state approach could also undermine the uniformity that DIDMCA was intended to provide for interstate lending.

Implications for banks and FinTech companies

The interpretation of Section 525 has practical consequences for any state-chartered bank that makes loans across state lines.

If an opt-out state may impose its interest-rate limits on loans made by out-of-state state banks, those banks may need to modify their lending programs, apply different rates depending on the borrower’s state and reassess existing bank-FinTech partnerships. FinTech companies that rely on state-chartered banks to originate loans nationwide could face increased compliance costs and uncertainty regarding the enforceability of their programs.

It could also lead to many state banks applying to the Office of the Comptroller of the Currency to convert their charters into national banks, a development which would jeopardize the continued viability of our dual banking system.

Non-bank FinTechs who are partnering with state banks to offer interstate lending programs may want to terminate those programs and instead seek to partner with national banks

If, as H.R. 7866 would clarify, the opt-out applies only to banks chartered by the opt-out state, out-of-state state banks would remain able to rely on Section 521 when making loans to residents of that state. The opt-out state would retain authority to prevent its own state-chartered banks from exporting their home-state rates, but it would not be able to regulate the rates charged by state banks chartered elsewhere.

What to watch at the hearing

The Committee’s discussion of H.R. 7866 may provide insight into how members view the purpose and operation of Section 525. Among the questions to watch are:

  • Will members address the ongoing litigation in Colorado and Oregon?
  • Will the Committee examine the distinction between preventing banks chartered in an opt-out state from using Section 521 and regulating loans made by out-of-state state banks?
  • How would H.R. 7866 affect bank-FinTech lending partnerships and nationwide lending programs?
  • Will members consider whether differing state interpretations of Section 525 could disrupt interstate lending?
  • Will the hearing provide any indication that H.R. 7866 may advance toward Committee consideration?

The hearing comes at an important time. The Colorado and Oregon litigation, together with the newly introduced New York opt-out bill, demonstrates that the scope of Section 525 is no longer a theoretical question. States, banks and FinTech companies need clarity regarding whether an opt-out reaches loans made by out-of-state state banks or instead operates only to prevent banks chartered in the opt-out state from relying on Section 521.

H.R. 7866 would provide that clarification by confirming that Section 525 was not intended to authorize an opt-out state to regulate the interest rates charged on loans made by out-of-state state banks to residents of the opt-out state. Its purpose was only to preclude state banks in the opt-out state from using Section 521.