Three major financial services trade organizations have filed a lawsuit against a new Colorado statute imposing interest-rate and fee caps on loans by state-chartered banks, including those from outside the state. The American Fintech Council (AFC), the American Financial Services Association (AFSA), and the National Association of Industrial Bankers (NAIB) argue that this law conflicts with federal regulations and limits consumer choice.
The law in question, HB23-1229, is set to take effect on July 1, 2024. It aims to address "predatory" lending practices but is criticized for being overly broad. According to the plaintiffs, it contradicts the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and negatively impacts community banks' competitiveness without achieving its intended goals.
Frank Pignanelli of NAIB expressed concerns about the potential negative impact on state-chartered banks compared to national banks. "HB23-1229 is likely to have the opposite effect of what its supporters intend," he said.
Phil Goldfeder, CEO of AFC, emphasized that consumers need safe financial options. He stated, "This ill-conceived new law will harm Colorado families, particularly those in minority and rural communities."
Bill Himpler of AFSA warned about unintended consequences affecting consumers needing financial flexibility. He commented that AFSA members provide essential credit products for those with less-than-perfect credit.
The legal team representing these organizations includes Davis Wright Tremaine LLP, Sullivan & Cromwell LLP, and Ed Perlmutter from Holland & Knight LLP in Denver. David Gossett from Davis Wright Tremaine noted that they plan to seek a preliminary injunction soon.
"The language of HB23-1229 is plainly invalid," Gossett remarked, explaining how it conflicts with federal law by treating out-of-state loans as if made within Colorado.
Perlmutter also criticized the statute's overreach beyond what Congress authorized under federal law: "In addition to being preempted, HB23-1229 is disadvantageous to our clients."
The lawsuit names Colorado Attorney General Phil Weiser and Martha Fulford as defendants in their official capacities under this challenge.