Banking And Consumer Credit Trade Associations Challenge Oregon’s DIDMCA Opt-Out Law

Three leading financial services trade associations (the National Association of Industrial Bankers (NAIB), the Online Lenders Alliance (OLA), and the American Financial Services Association (AFSA)) have just filed a lawsuit in Federal District Court in the District of Oregon challenging a recently enacted Oregon law effective June 5, 2026, that seeks to impose Oregon’s 36% interest-rate cap on consumer finance loans made by out-of-state state-chartered banks in their home states to Oregon residents.

The lawsuit contends that Oregon House Bill 4116 is preempted by federal banking law and, in part, violates the dormant Commerce Clause of the U.S. Constitution.

The plaintiffs are represented by our law firm (Pilar French in our Portland, Oregon office and Burt Rublin, Alan Kaplinsky and Facundo Bouzat, who are in the Philadelphia office).

Background

The dispute centers on Oregon’s enactment of House Bill 4116. The legislation amends Oregon’s Consumer Finance Act and includes two significant provisions.

First, Oregon exercised its right under Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) to “opt out” of Section 521 of DIDMCA. Section 521 generally permits state-chartered banks to charge interest at rates authorized by the laws of the state where the bank is located and to “export” those rates when making loans to borrowers in other states.

Second, and more controversially, Oregon went further by attempting to apply its Consumer Finance Act and its 36% annual interest-rate ceiling to consumer finance loans of $50,000 or less made by out-of-state state-chartered banks in their home states to Oregon residents.

The complaint argues that Oregon’s law is one of the most aggressive state efforts to date to restrict interstate lending by state-chartered banks.

The Federal Preemption Claim

The plaintiffs contend that Oregon exceeded the authority granted to states under Section 525 of DIDMCA.

According to the complaint, Section 521 of DIDMCA authorizes state-chartered banks to charge interest permitted by the laws of the state where the bank is located and expressly preempts conflicting state interest-rate limitations in the borrower’s state. The trade associations argue that a state’s opt-out authority under Section 525 extends only to loans “made in” that state by its own state banks and does not permit a state to regulate loans made by state banks located in other states to Oregon residents.

The complaint relies heavily on the federal district court’s decision in National Association of Industrial Bankers v. Weiser which held that, for purposes of DIDMCA, a loan is “made” where the bank is located and performs its lending functions, not where the borrower resides. Although a divided panel of the Tenth Circuit subsequently reversed that decision, the panel ruling was vacated when the court granted rehearing en banc and the appeal remains pending. We recently blogged about the opening supplemental brief filed by the plaintiff trade associations (which includes 2 of the 3 plaintiffs in the newly filed Oregon case) and 6 amici supporting the plaintiffs. Among the 6 amici briefs that were filed, one was submitted by the FDIC and the other was submitted by the OCC. The authors of this blog submitted an amicus brief on behalf of the American Bankers Association, Consumer Bankers Association, Bank Policy Institute, 50 state bankers associations and America’s Credit Unions.

The plaintiffs argue that Oregon’s law improperly attempts to regulate loans made by out-of-state state banks in their home states in conformity with their home states’ laws and therefore conflicts with Section 521’s express preemption provision.

Dormant Commerce Clause Challenge

The complaint also advances a separate constitutional challenge to a portion of the Oregon statute.

Specifically, the plaintiffs challenge a provision that applies Oregon law whenever an Oregon resident makes payments on a consumer finance loan from an Oregon bank account or through an Oregon financial institution, even if both the bank and the borrower were physically located outside Oregon when the loan was made.

According to the complaint, this provision regulates conduct occurring wholly outside Oregon’s borders and therefore violates the dormant Commerce Clause under Supreme Court precedents such as Healy v. Beer Institute, 491 U.S. 324 (1989)and Ninth Circuit decisions invalidating extraterritorial state regulation.

Practical Impact on State-Chartered Banks

The trade associations allege that their members already are incurring significant compliance costs as a result of the new law. They further contend that enforcement of the statute has forced many state-chartered banks to reduce lending activity in Oregon, curtail relationships with retail and fintech partners, and withdraw credit products from high-risk borrowers residing in Oregon.

The complaint also emphasizes what has become a recurring theme in litigation involving state opt-out statutes: the alleged competitive imbalance between state-chartered banks and national banks. Because national banks derive their interest-rate exportation authority from Section 85 of the National Bank Act rather than DIDMCA, Oregon’s law will not affect their ability to charge rates authorized by their home states to Oregon borrowers. Plaintiffs allege that the Oregon law is contrary to the express purpose of Section 521 of DIDMCA, which was to create parity between state-chartered depository institutions and national banks.

The plaintiffs argue that the law disadvantages state-chartered banks while providing little practical benefit to consumers because national banks remain free to export their home states’ rates under federal law, and the national banks will face less competition from state banks because of the law.

Why This Case Matters

The Oregon lawsuit is the latest chapter in the ongoing national debate over the scope of DIDMCA’s opt-out provision and the ability of states to regulate loans made by out-of-state state-chartered banks.

Oregon joins a handful of jurisdictions (Iowa, Colorado and Puerto Rico) that currently maintain DIDMCA opt-outs, and the litigation comes against the backdrop of the closely watched Weiser case pending before the Tenth Circuit sitting en banc. The Oregon case will provide another federal court with an opportunity to address a question that has become increasingly important as bank-fintech partnerships and interstate digital lending continue to expand: where is a loan “made” for purposes of Section 525 of DIDMCA, and how far may an opt-out state go in restricting interstate lending activity?

The answer will have significant implications not only for state-chartered banks but also for fintech companies, retailers, and consumers who rely on bank-partnership lending models. Depending on the outcome, the litigation could help define the limits of state authority over interstate lending for years to come.