Colorado House Bill 23-1229 (the Bill) was signed into law on June 5, 2023. As part of the Bill, Colorado opted out of the federal interest exportation right granted to federally insured, state-chartered banks under the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). In this Flash, we spotlight three important things you should know for credit card and lending programs.

1. Two other jurisdictions already have opted out of interest exportation: Iowa and Puerto Rico. Section 521 of DIDMCA provides for a preemption of state usury laws by authorizing federally insured, state-chartered banks to charge and export the interest permitted by the laws of the state where the bank is located to borrowers residing in other states. For exportation purposes, "interest" includes numerical periodic rates and certain fees. Where a bank is "located" is the bank's home state or, in some circumstances, the state where the bank has a branch. However, DIDMCA also gives states the authority to opt out of federal interest exportation under the provisions of section 525. When a state opts out, an out-of-state, state-chartered bank loses its exportation rights with respect to loans made in the opt-out state and, instead, becomes subject to that state's usury limits (which may be more restrictive). Both Iowa and Puerto Rico already have exercised their opt-out authority under section 525. Effective July 1, 2024, Colorado will join them, preventing out-of-state, state-chartered banks from exporting interest with respect to loans (and other extensions of credit) made in Colorado. For a primer on interest exportation and the DIDMCA state opt-out, see ourInterest Exportation FAQs: 8 Questions to Consider When Offering a Credit Card or Lending Program.

2. This opt-out does not apply to federally chartered banks. The opt-out provision under section 525 of DIDMCA applies only to federally insured, state-chartered banks. As such, a state's opting out of federal interest exportation does not affect national banks or federal savings banks. A federally chartered bank may continue to export the interest permitted by the law of the state where it is located on extensions of credit made in Colorado, Iowa, and Puerto Rico.

Key Takeaway: Federally chartered banks are a strong choice for any credit card or lending program. When choosing a bank partner, companies should consider putting federally chartered banks near the top of the list, not only because they are unaffected by state opt-out but also because they enjoy broad preemption powers that state-chartered banks do not.

4. An out-of-state, state-chartered bank making loans or other extensions of credit in Colorado will be subject to the interest and fee limits in the Colorado Consumer Credit Code (the Code).
 The chart below provides a high-level summary of the maximum finance charge permitted by the Code for certain consumer credit transactions of $75,000 or less that are made in the state of Colorado. Those fees and charges that constitute a "finance charge" for purposes of these limits are prescribed by the Code and are not covered in this chart.

Type of Credit Product Maximum Permissible "Finance Charge"

"General-purpose credit cards" that do not charge fees (including pre-account-opening fees) exceeding 15% of the credit limit

 Effective July 1, 2024, unlimited

Other credit cards (including private label), and open-end lines of credit that exceed a rate of finance charge of 12% per year (a category of "Supervised Loans" as defined by the Code, which may be made only by a licensee or a supervised financial organization, such as a bank)

 21% per year, calculated according to the actuarial method

Closed-end consumer loans that exceed a rate of finance charge of 12% per year (a category of "Supervised Loans" as defined by the Code, which may be made only by a licensee or a supervised financial organization, such as a bank)

The greater of either:

  • 21% per year; or
  • the sum of:
    1. 36% per year on amounts of $1,000 or less, plus
    2. 21% per year on amounts of $1,000.01 to $3,000, plus
    3. 15% per year on amounts of $3,000.01 or more,
calculated according to the actuarial method.

Or, for certain loans of $1,000 or less, see alternative below.

Alternative for closed-end consumer loans that exceed a rate of finance charge of 12% per year and (i) are $1,000 or less; (ii) have a term of six to 12 months; and (iii) are repayable in substantially equal installments at equal periodic intervals (a category of "Supervised Loans" as defined by the Code, which may be made only by a licensee or a supervised financial organization, such as a bank)

Effective January 1, 2024, in lieu of the rate of finance charge provided above:

  • an acquisition charge of up to 8% of the amount financed; and
  • a monthly installment account handling charge up to:
    1. $8.50 per month for amounts financed of $100 to $300
    2. $11.50 per month for amounts financed of $300.01 to $500
    3. $14.50 per month for amounts financed of $500.01 to $750
    4. $17.50 per month for amounts financed of $750.01 to $1,000.

Closed-end consumer loans and open-end lines of credit not exceeding a rate of finance charge of 12% per year (i.e., not "Supervised Loans")

 12% per year, calculated according to the actuarial method

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.