Executive Summary

The Conference of State Bank Supervisors (CSBS), the nationwide organization representing state banking and financial regulators, has endorsed legislation that would clarify a critical issue concerning the scope of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). The development comes as the House Financial Services Committee prepares to mark up H.R. 7866, the American Lending Fairness Act of 2026, on Wednesday, September 16, 2026, at 10 a.m. ET.

The CSBS letter rejects the interpretation advanced by Colorado and Oregon that a state’s DIDMCA opt-out under Section 525 permits it to regulate loans made by out-of-state state-chartered banks merely because the borrowers are located in the opt-out state.

That is the central issue in litigation pending before the Tenth Circuit and in a more recently filed case in Oregon, in which Ballard Spahr represents the trade association plaintiffs. The FDIC and OCC have filed amicus briefs in both cases, advancing the same basic interpretation of Section 525 of DIDMCA that CSBS now supports.

CSBS Endorses the Narrow Interpretation of DIDMCA’s Opt-Out

Section 521 of DIDMCA permits a federally insured state-chartered bank to export the interest rate permitted by the law of its home state when making loans across state lines. Section 525 permits a state to opt out of that federal interest-rate preemption for “loans made in such State.”

The parties disagree about what that phrase means.

Colorado and Oregon contend that a loan is “made” in their states when the borrower is located there. On that view, their interest-rate restrictions apply to loans made by out-of-state state-chartered banks. The plaintiffs in both cases contend that Section 525 does not authorize an opt-out state to regulate banks chartered by other states because the loan is “made” only in the bank’s state.

CSBS has now endorsed the plaintiffs’ interpretation.

In a September 2 letter to House Financial Services Committee Chairman French Hill and Ranking Member Maxine Waters, CSBS urged Congress to enact H.R. 7866. The letter explains that the legislation would “preserve each state’s authority to establish the rules governing its own chartered institutions” while maintaining competitive equality between state-chartered and national banks.

CSBS also warned that a broader interpretation of the opt-out provision could disrupt the dual banking system. As the letter states, “[a] state’s decision to opt out of DIDMCA should not allow it to regulate the activities of banks chartered by other states.” CSBS further explained that such an interpretation could “undermine the competitive balance between state and national banks” and create uncertainty for banks, regulators, and consumers.

Those concerns help explain why CSBS has weighed in. Its position is not limited to the interests of individual state-chartered banks. Rather, CSBS is focused on preserving the allocation of regulatory authority within the dual banking system: states should be able to establish the rules governing institutions they charter, but one state should not be able to regulate banks chartered by another state simply because those banks lend to its residents.

Congress May Clarify the Issue

The CSBS letter comes as the House Financial Services Committee prepares to mark up H.R. 7866 on September 16.

The bill would clarify that a state’s DIDMCA opt-out applies only to institutions chartered by that state. An opt-out therefore would prevent a state-chartered bank located in the opt-out state from relying on DIDMCA to export its home-state interest rate. It would not, however, authorize that state to impose its interest-rate restrictions on an out-of-state state-chartered bank lending to one of its residents.

As Stated Above, The Issue Is Also Before the Courts

The issue is pending before the Tenth Circuit in National Association of Industrial Bankers v. Weiser, which concerns Colorado’s attempt to apply its DIDMCA opt-out to loans made by out-of-state state-chartered banks to Colorado residents. The Tenth Circuit granted rehearing en banc in April and heard oral argument on August 18. Ballard Spahr represents several bank trade associations that filed amicus briefs supporting the plaintiffs.

The same fundamental issue is presented in Oregon. In June, the National Association of Industrial Bankers, the American Financial Services Association, and the Online Lenders Alliance sued to block enforcement of Oregon’s recently enacted DIDMCA opt-out law. The plaintiffs moved for a preliminary injunction on July 9, and the motion is fully briefed.

The federal banking regulators have supported the plaintiff bank trade associations in both cases. The FDIC and OCC each filed amicus briefs supporting the plaintiffs in the Oregon litigation, and both agencies previously submitted amicus briefs in the Colorado litigation. Their briefs advance the same basic interpretation of Section 525 that CSBS has now endorsed: an opt-out state cannot use Section 525 to regulate loans made by an out-of-state state-chartered bank merely because the borrower is located in the opt-out state.

An Important Convergence

CSBS’s letter reflects an important convergence among state and federal banking regulators, the affected trade associations, and the financial institutions challenging the Colorado and Oregon laws.

The federal banking agencies have urged the courts to reject the states’ interpretation of Section 525. CSBS, speaking for the state banking regulatory community, has now urged Congress to enact legislation that would clarify the limited scope of Section 525 opt-out. And the House Financial Services Committee is poised to consider that legislation. A companion bill has also been introduced in the Senate.

Whether the issue is ultimately resolved by Congress or the courts, these developments reaffirm a basic principle underlying DIDMCA: a state may determine the rules applicable to institutions it charters, but its decision to opt out of DIDMCA should not give it regulatory authority over banks chartered by other states.