DENVER (Legal Newsline) - A Colorado federal judge has stopped a state law that restricts the interest rates banks can charge in the state.
Judge Daniel Domenico on June 18 found the National Association of Industrial Bankers and other plaintiffs have shown a likelihood of success in their challenge to the law and issued a preliminary injunction.
Interest rates set in the Colorado Uniform Consumer Credit Code are lower than federal standards. The industry says its lenders can't be subjected to Colorado law when their home states are elsewhere.
"The threat of enforcement of the Colorado UCCC against the plaintiffs' members if they continue to offer loans to Colorado consumers at interest rates above Colorado's caps after the July 1 effective date of the opt-out is a credible one," Domenico wrote.
The suit is aimed at Philip J. Weiser, Attorney General of the State of Colorado, and Martha Fulford, Administrator of the Colorado Uniform Consumer Credit Code.
The plaintiffs are challenging Section 3 of H.B. 23-1229 which became law on June 5, 2023, and is set to take effect on July 1, 2024. This section attempts to opt Colorado out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA).
The DIDMCA allows a state-chartered bank to lend nationwide at rates up to its home state’s interest-rate caps or a federal interest-rate cap.
The plaintiffs argue that Colorado's opt-out exceeds the authority granted by DIDMCA and violates both the Supremacy Clause and Commerce Clause of the United States Constitution. They contend that it will impede interstate commerce and subject state-chartered banks to inconsistent obligations across different states.
The plaintiffs also assert that this law will not achieve Colorado's stated goals against predatory lending as their members are not payday lenders but offer a variety of credit products.
They believe that this law will limit product choices for Coloradans while national banks continue to offer similar products at higher interest rates due to protections under the National Bank Act.