A federal judge has issued a preliminary injunction against a Colorado statute that imposes interest-rate and fee caps on loans made to Colorado residents by state-chartered banks located outside the state. The ruling came in response to a lawsuit filed by three financial services trade organizations: the American Fintech Council (AFC), the American Financial Services Association (AFSA), and the National Association of Industrial Bankers (NAIB).
U.S. District Judge Daniel D. Domenico found that the trade groups "have made a strong showing that they are substantially likely to succeed on the merits of their preemption claim."
Phil Goldfeder, CEO of the American Fintech Council, stated, "The decision to grant a preliminary injunction is a victory for the Colorado families who deserve access to safe, affordable, and responsible financial options that best serve their needs." He added that AFC's members represent responsible fintech companies and innovative banks committed to transparency and democratizing financial services.
The new law, HB23-1229, was set to take effect on July 1, 2024. It aimed to curb "predatory" lending practices by out-of-state banks. However, plaintiffs argued that the law's cap on interest rates extends beyond what Congress intended under the federal Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). They claimed it would undermine community banks' competitive position without advancing state goals since national banks would not be subject to it.
Plaintiffs include ethical state-chartered banks offering various credit products such as personal installment loans, "buy now, pay later" loans, vehicle financing, and store-branded credit cards.
The trade organizations are represented by lawyers from Davis Wright Tremaine LLP, Sullivan & Cromwell LLP, and Holland & Knight LLP.