The passage of Oregon House Bill 4116 isn’t about consumer protection, it’s about asserting regulatory control in a landscape increasingly defined by federal preemption. The bill, poised for Governor Kotek’s signature, attempts to cap interest rates on loans from out-of-state, state-chartered banks at 36% – Oregon’s existing limit – despite a 1980 federal law, the Depository Institutions Deregulation and Monetary Control Act (DIDMCA), explicitly allowing these banks to operate under their home state’s lending laws. This isn’t a standalone policy decision; it’s a calculated move in a growing state-federal power struggle over financial regulation, and a direct response to the evolving legal interpretation of DIDMCA following the Tenth Circuit’s ruling in National Association of Industrial Bankers v. Weiser.
The Limits of State Authority
The core issue isn’t whether Oregon wants to protect its citizens from high-interest loans – the stated justification for H.B. 4116. It’s whether Oregon can legally do so. DIDMCA was designed to create a level playing field, allowing state-chartered banks to compete with national banks, which already enjoyed the ability to export interest rates based on their headquarters location, thanks to the 1978 Marquette Nat. Bank of Minneapolis v. First of Omaha Serv. Corp. decision. Neither DIDMCA, nor any subsequent federal statute, grants states the authority to override this established framework. H.B. 4116, therefore, targets a specific segment of lenders – out-of-state state banks – while conspicuously leaving national banks untouched. This selective approach reveals the strategic limitation of the bill: it’s a symbolic gesture more than a substantive solution.
Reporting from consumerfinancemonitor.com informs this analysis.
Colorado’s Cautionary Tale and the Tenth Circuit Split
Oregon’s move echoes Colorado’s 2023 attempt to opt-out of DIDMCA, a law currently embroiled in legal challenges. Initially, a District Court in Colorado sided with the banks, arguing that a loan is “made” by the lender, not the borrower, thus limiting the reach of the state’s opt-out. However, the Tenth Circuit reversed this ruling, holding that a loan is “made” in both the lender’s and borrower’s states, effectively upholding Colorado’s usury limits. This decision, however, is far from settled. A petition for rehearing en banc is pending, and both the Office of the Comptroller of the Currency and the FDIC have filed amicus briefs urging the court to reconsider. The ongoing legal battle in Colorado underscores the precarious legal footing of Oregon’s H.B. 4116, and the potential for a conflicting circuit court ruling down the line. The fact that the American Bankers Association and the Bank Policy Institute also filed amicus briefs demonstrates the high stakes for the financial industry.
Who Benefits and Who Loses?
The immediate beneficiaries of H.B. 4116, if it withstands legal scrutiny, are Oregon consumers who might otherwise be subject to higher interest rates from out-of-state state banks. However, the law’s impact is likely to be limited. National banks, unaffected by the legislation, will continue to operate under federal guidelines. The real losers are the out-of-state state banks currently serving Oregon borrowers, who may see their lending operations curtailed or forced to adjust their business models. More broadly, the bill creates uncertainty for interstate lending, potentially discouraging banks from offering loans to residents of states with aggressive regulatory agendas. This dynamic mirrors historical tensions between states seeking to protect their citizens and the federal government’s authority to regulate interstate commerce, a conflict dating back to the early days of the republic.
The Federal Counteroffensive: The American Lending Fairness Act
While Oregon and a handful of other states – Iowa and Puerto Rico currently opt-out, with Rhode Island considering similar legislation – attempt to carve out regulatory autonomy, a federal counteroffensive is underway. The “American Lending Fairness Act of 2026,” sponsored by Senator Moreno and Congressman Davidson, directly targets the Tenth Circuit’s decision and aims to preempt future state opt-outs. If passed, this act would effectively nullify H.B. 4116 and solidify the federal government’s control over interstate lending. This legislative push represents a clear escalation in the state-federal conflict, and a signal that Congress is prepared to intervene to protect the interests of national banks and maintain a uniform regulatory framework.
The next political chess move to watch isn’t in Oregon, but in Congress. Will the American Lending Fairness Act gain traction, and if so, what compromises will be necessary to secure its passage? The outcome will not only determine the fate of H.B. 4116, but also set a precedent for the future of state-federal relations in the realm of financial regulation. The question isn’t simply about interest rates; it’s about who ultimately controls the terms of credit in America.
