7 minute read | November.12.2025
On November 10, the U.S Court of Appeals for the 10th Circuit reversed a district court decision that had enjoined the State of Colorado from enforcing its state usury laws against state-chartered banks located outside of Colorado. The decision is not effective immediately and is subject to further review, either through a petition for rehearing by the full en banc 10th Circuit or through a petition for certiorari to the U.S. Supreme Court. If it holds, however, loans made to Colorado residents by out-of-state state-chartered banks — with the exception of certain “general purpose credit card” loans, discussed below — would be subject to Colorado usury limits.
To ensure that state-chartered banks could compete with national banks in a high-rate economic environment, the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) authorized state-chartered banks to charge interest at a rate permissible in the state “where the bank is located.”[1] Congress, however, allowed states to “opt-out” from the preemptive effect of this provision, at least in part, by enacting a law that “states explicitly and by its terms that such State does not want this section to apply with respect to loans made in such State” (emphasis added).[2]
In 2023, Colorado enacted HB1229 to add Colo. Rev. Stat. § 5-13-106 and exercise this opt-out authority. Several trade associations sued for a declaratory judgment that the opt-out did not impact the rates at which their state-chartered bank members located outside of Colorado could charge Colorado residents. They moved for a preliminary injunction, which the district court granted in June 2024.
On appeal of that injunction, the key question before the Tenth Circuit was whether “loans made in such State” includes only loans originated by a bank located in Colorado (as the district court held), or if it also includes loans originated by a bank located outside of Colorado but issued to Colorado residents (as the Colorado Attorney General argued on appeal).
A majority of the panel — U.S. Circuit Judges Phillips and Federico — held that the key statutory phrase “loans made in such State” encompassed loans made to Colorado residents, even if the bank making the loan was not located in Colorado. The Court of Appeals rejected the district court’s view that the person “making” a loan is the lender, not the borrower, and held instead that a loan “made” in the state includes any loan “executed” in the state. The appellate court reasoned that the “execution” of any loan requires two parties — the lender and the borrower — and that a loan is therefore “made” in a state “in which either the lender or the borrower is located.” It also reasoned that 12 U.S.C. § 1831d(a)’s specific reference to “the laws of the State … where the bank is located” suggested that Congress’s choice of different language in the opt-out provision was intended to capture states in addition to where the bank is located — e.g., it could have said “loans made by state banks in such State,” or “loans originated by state banks in such State.”
The Court of Appeals also viewed its holding as more consistent with the “purpose” of the opt-out provision, which it viewed as intended to, in effect, repeal 12 U.S.C. § 1831d(a), including its preemption of state usury laws that would otherwise apply to loans made to opt-out state residents.
Finally, the Court of Appeals declined to provide any deference to prior FDIC (and Office of Thrift Supervision) interpretations of the opt-out provision, which it viewed as conflicting and, in any event, not helpful given its understanding of the text and purpose of the provision.
Having reversed the district court’s holding on this central legal issue, the Court of Appeals went on to hold that the plaintiffs were not entitled to an injunction, notwithstanding the irreparable harm they might suffer, because they were not likely to succeed on the merits of their claims.
U.S. Circuit Judge Rossman dissented. In her view, the best reading of the text of DIDMCA’s opt-out provision is that it applies to loans made by banks located in the state opting out. DIDMCA was about the regulation of banks, Judge Rossman observed, not about consumer protection; were it otherwise, Congress would have allowed states to opt-out of preemption applicable to national banks, which nobody argues is impacted by the enactment of a DIDMCA opt-out. Further, the opt-out provision was enacted at a time when banking and consumer lending was primarily an intrastate affair, and therefore the majority’s concerns with the impact of interstate lending were not the same concerns motivating Congress in 1980. Finally, Judge Rossman regarded FDIC guidance issued just a few years after DIDMCA was enacted as persuasive evidence of the statute’s meaning. That guidance, particularly the 1988 FDIC interpretative guidance, reveals a consistent interpretation that where a loan is “made” requires “a functional analysis of banking operations” but does not depend on the location of the borrower.
The 10th Circuit’s decision is not immediately effective and will not become effective for 21 days from the date of the opinion, at the earliest. The effective date could be delayed further if the plaintiffs seek rehearing en banc, or if the plaintiffs ask the Court of Appeals to stay issuance of the mandate pending a petition for certiorari to the U.S. Supreme Court.[3] Although plaintiffs have not yet indicated whether they will seek review of the decision, they likely will. If the full 10th Circuit decides to take the case en banc, or if the Supreme Court decides to hear the case, the outcome could change and the injunction would remain in place pending those decisions, which would likely come more than a year from now. Note that both courts grant a small percentage of the petitions for en banc review or certiorari presented to them, but this case is a good candidate given its importance and the lack of any binding precedent.[4] The upshot is that the decision does not go into effect now and may never go into effect, but it could go into effect in a matter of weeks. State-chartered banks that make loans to Colorado residents, and fintech platforms that partner with such banks, should prepare now to comply with Colorado limits on rates and fees.
If the decision holds, state-chartered banks located outside of Colorado making loans to Colorado residents will be subject to Colorado’s laws governing permissible rates and fees. For closed-end consumer loans, the rate cap in the Colorado Consumer Credit Code is either (1) 21% or (2) a graduated rate of 36% on the first $1,000, 21% on that portion of the balance between $1,000 and $3,000, and 15% on that portion of the balance that exceeds $3,000. Open-end consumer loans, except for “general purpose credit cards,” are subject to a 21% cap on the interest rate.[5] Such loans would also be subject to various limits related to fees, including caps on late fees, that would otherwise be preempted by DIDMCA.[6]
The Colorado legislature excepted from state limits on rates and fees certain general purpose credit cards, which it defined as those credit cards that are accepted at “multiple, unaffiliated merchants,” and that do not have fees (including pre-account opening fees) that exceed 15% of the credit line. A general purpose credit card does not include an “overdraft line of credit” that is accessible through a prepaid card or debit card or account number and does not include a “charge card.”[7] The Colorado Uniform Consumer Credit Code Administrator issued interpretive guidance regarding this provision last summer, in which she stated that she would interpret the limitations on fees in a manner that is consistent with the similar provision of Regulation Z, 12 CFR 1026.52(a), except that the cap is 15%, not 25%, and applies in every year the credit card is opened and not just the first year.
Legislators from Rhode Island, Colorado, the District of Columbia, Michigan and Minnesota have introduced nine bills since 2022, similar DIDMCA opt-out legislation, and consumer advocacy groups have been supporting these efforts across the country. To date, none of these bills other than Colorado’s has been enacted, but it is possible that such efforts had been put on hold following the district court’s decision. If the 10th Circuit’s decision stands, it will almost certainly reignite those efforts. Such laws would remain subject to challenge, though the 10th Circuit’s decision would bind lower courts in that circuit.
[1] 12 U.S.C. § 1831d(a).
[2] 12 U.S.C. § 1831d.
[3] See Fed. R. App. P. 40, 41.
[4] See, e.g., Fed. R. App. P. 40(b)(2)(D), Sup. Ct. R. 10(c).
[5] See Colo. Rev. Stat. § 5-2-201.
[6] See Colo. Rev. Stat. §§ 5-2-202, 5-2-203.
[7] See Colo. Rev. Stat. § 5-2-213.