Oregon Legislature Passes DIDMCA Opt-Out Bill

Last week, the Oregon legislature passed that would opt the state out of federal rate exportation for loans “made in” Oregon by state banks. The Oregon law provides that Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), which extended rate exportation privileges to state banks, will not apply to consumer finance loans made in the state. Oregon’s passage of a DIDMCA opt-out bill follows a similar law that was passed in Colorado in 2023, and which is currently the subject of litigation in the Tenth Circuit.

The law also expands the Oregon Consumer Finance Act to apply to any person who acts as an agent, broker, or facilitator for a lender of consumer finance loans of $50,000 or less if the lender extends a loan to a consumer who resides in Oregon and the consumer either (a) negotiates, agrees to, or executes a loan contract for $50,000 or less in person or by mail, telephone, or the internet while being physically present in Oregon; or (b) makes a payment on a loan by debiting an account at a financial institution or trust company located in Oregon or using a negotiable instrument drawn on a financial institution or trust company.

Oregon Governor Tina Kotek is a strong supporter of the bill and is expected to sign it into law. If so, it will become effective on June 5, 2026.

DIDMCA Background

DIDMCA was enacted during an era of historically high interest rates to establish parity between national banks and state banks with respect to interest rate exportation. While national banks had long been permitted under the National Bank Act to charge the rates of interest permitted by the bank’s home state nationwide, state banks remained subject to state-by-state usury limits, restricting the rates at which such state banks were permitted to lend. DIDMCA eliminated this competitive imbalance, providing state banks with the same rate exportation privileges afforded to national banks. 

However, this came with a significant condition. Section 525 of DIDMCA permits states to opt out of state bank rate exportation with respect to loans “made in” the opting out state. Although several states initially opted out, most of those states rescinded their opt outs, leaving only Iowa and Puerto Rico and making the DIDMCA opt-out provision somewhat of an afterthought for many years. However, in June 2023, Colorado adopted an opt-out law, resulting in renewed debate (and litigation) over the opt-out provision.

The Colorado Litigation

Colorado’s opt-out law was challenged by a group of trade associations in Colorado federal court in 2024. That litigation, which remains pending, primarily concerns the question of where a loan is “made” for purposes of the opt-out provision. Colorado has taken the position that the location of the borrower is dispositive, meaning that any loan to a Colorado resident is subject to Colorado’s usury limit, regardless of the lending bank's location. On the other hand, the industry’s view, which is supported by federal authorities, is that the question of where a loan is “made” depends on a variety of factors, including the choice of law stated in the loan documents and the location from which the bank approves an extension of credit, extends the credit, and disburses the loan proceeds. Under this view, a loan by an out-of-state bank can be “made” in the bank’s home state, and so the bank can export its home state’s usury limits, even when the borrower is a Colorado resident. 

The District Court sided with the industry, issuing a preliminary injunction prohibiting Colorado from enforcing its usury limits against the plaintiff trade associations and their members. However, the Tenth Circuit reversed, holding that the state can enforce its usury caps against out-of-state banks with respect to loans made to Colorado borrowers. The plaintiffs have filed a petition for rehearing en banc and will likely appeal to the United States Supreme Court if that petition is denied. Furthermore, a federal bill—the American Lending Fairness Act—has also been proposed in Congress and, if passed, would effectively overturn the Tenth Circuit decision.

Implications

The Oregon opt out is likely to be challenged on similar grounds, and any such challenge would likely be heard by a court in the Ninth Circuit. Absent a United States Supreme Court opinion resolving these issues, this may lead to years of uncertainty over the impact of a DIDMCA opt out. If the Tenth Circuit holds firm in its current view, this could embolden other states to pass their own DIDMCA opt outs. Indeed, a number of states, including Maryland, Nevada, Minnesota and Rhode Island, as well as the District of Columbia, are currently considering or have recently considered opt out legislation. State banks and nonbank service providers facilitating loans for such state banks would be well-advised to closely follow these developments.

If you have any questions, please contact any of the authors or the Manatt professional with whom you work.