Trade Groups Challenge Oregon’s DIDMCA Opt-Out Law

On June 15, three financial services trade associations filed suit in the U.S. District Court for the District of Oregon seeking to block Oregon House Bill 4116, which became effective on June 5. The complaint alleges that the law exceeds Oregon’s authority under the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and violates the Dormant Commerce Clause.

H.B. 4116 amended Oregon’s Consumer Finance Act and exercised the state’s authority under Section 525 of DIDMCA to opt out of Section 521, which generally permits state-chartered banks to export interest rates authorized by the laws of the states where they are located. According to the complaint, however, Oregon went beyond opting out by attempting to apply its 36% interest-rate cap to certain loans made by out-of-state state-chartered banks under their home-state laws. Specifically, the complaint alleges that:

• DIDMCA limits Oregon’s opt-out authority. Section 525 allows a state to opt out only for loans made within that state, and does not authorize Oregon to regulate loans made by state-chartered banks located in other states.
• Loan location remains a threshold issue. For purposes of DIDMCA, the plaintiffs allege that a loan is made where the bank performs its lending functions, not where the borrower resides.
• Certain provisions reach out-of-state conduct. The complaint alleges that H.B. 4116 improperly applies Oregon law when payments are made through Oregon bank accounts or financial institutions, even where relevant conduct occurs outside Oregon.
• The law disrupts bank charter parity. According to the complaint, Oregon’s law disadvantages state-chartered banks because national banks rely on the National Bank Act, rather than DIDMCA, for rate exportation authority.

The plaintiffs seek declaratory and injunctive relief preventing enforcement of the challenged provisions.

Putting It Into Practice: The Oregon lawsuit follows the closely watched Colorado litigation (previously discussed here) and reflects continued disputes over the scope of states’ authority under DIDMCA and the ability of out-of-state state-chartered banks to export interest rates across state lines. Banks, fintech companies, and other participants in bank partnership programs should continue monitoring these developments and assess whether new state laws or future court decisions could affect interstate lending models and compliance obligations.