DIDMCA Opt-Outs Resurface: Oregon Legislation and the Colorado Case Could Alter the Landscape for Interstate Lending by State Banks

[Music] Hello and welcome to the award winning consumer finance monitor podcast where we explore important developments in the world of consumer financial services and what they mean for your business, your customers and the industry. This is a weekly show brought to you by the consumer financial services group at the Ballard Spire Law firm and I'm your host Alan Kaplinsky, the founder of and former practice group leader for 25 years and now senior counsel of the consumer financial services group at Ballard Spire and I'll be moderating today's program. For those of you who want even more information don't forget about our blog consumerfinancemonitor.com. We've hosted the blog since 2011 so there's a lot of relevant industry content there. We also regularly host webinars on subjects of interest to those in the industry so to subscribe to our blog or to get on the list for our webinars please visit us at BallardSpire.com and if you like our podcast please let us know about it. You can leave us a review on Apple Podcasts YouTube Spotify or wherever you access your podcast. Please let us know if you have any ideas for other topics that we should consider covering or speakers that we should consider inviting as guests on our show. So today we're going to be discussing an issue that is quickly moving toward the center of the debate over bank Fintech partnerships and the future of interstate lending by State Chartered Banks. For decades both national banks and State Chartered Banks have relied on the Supreme Court's Marquette decision and federal banking statutes to export their home states interest rates across state lines. In the case of State Chartered Banks that authority comes from Section 27 of the Federal Deposit Insurance Act which was enacted as part of the depository institutions deregulation and monetary control act of 1980 which is commonly referred to as didmica DIDMCA and that's how we'll refer to it throughout. Section 27 of the Federal Deposit Insurance Act was intended to give State Chartered Banks that were FDIC insured the same federal interest authority conferred on national banks by Section 85 of the National Bank Act. Like Section 85 it allows an FDIC insured State bank to charge interest at the rate permitted by the laws of the state where the bank is located even when the borrower resides in another state that has a lower interest rate cap. This is commonly referred to as interest rate exportation and it's long been a cornerstone of interstate lending by State Chartered Banks. However, didmica also contains a lesser known provision. Section 525 that permits individual states to opt out of that federal framework with respect to quote loans made in such state. There's an ongoing dispute as to the meaning of that phrase banks and bank trade associations contend that it only allows an opt-out state to limit the interest rates charged by state banks located in its own state. However, consumer organizations and the state of Colorado and some other states have argued that it also permits an opt-out state to limit the interest rates charged by state banks in other states to borrowers who reside in the opt-out state. In November of last year a divided panel of the 10th Circuit Court of Appeals adopted this more expansive interpretation and in a decision concerning an opt-out statute enacted by the state of Colorado. The 10th Circuit's unprecedented panel opinion has led to various blue states to consider exercising their opt-out rights including Oregon where an opt-out bill known as House Bill 4116 recently passed the legislature and is expected to be signed into law by the governor very soon. Oregon would join Colorado, Iowa and Puerto Rico is the only jurisdictions that are currently opted out from Didmaca. In the Colorado case a federal district court had entered a preliminary injunction in favor of the Fintech Trade Associations that filed suit against the state of Colorado and prohibited the Colorado Attorney General from enforcing the Colorado opt-out statute, statutes against out of state FDIC-intra-state banks that make loans to Colorado residents at interest rates permitted by the law of the states where the banks are located, even if those rates exceed Colorado's user read limit. However a three-judge panel of the 10th Circuit reversed that decision in a two-to-one ruling holding that the Colorado Statue can apply in that situation. The majority agreed with Colorado that alone is made both in the state where the bank is located and also in the state where the borrower is located. The plaintive Trade Associations petitioned the full court 10th Circuit Court of Appeals for re-hearing on bank. The re-hearing petition was supported by the FDIC-OCC, many red state attorneys general and by bank trade associations that are from Valorz Far represented as a meeky. On April 2nd, the 10th Circuit granted re-hearing on bank if vacated the three-judge panel decision that I mentioned a little bit earlier and established a new briefing schedule which we will get to later in our program. A preliminary injunction granted long ago by the District Court remains in full force and effect. These developments that I've summarized for you raise important questions about the scope of federal protections for interest rate exportation by state banks and the extent to which states may limit that authority. To help unpack these developments, I'm joined today by two of my Valorz Spar colleagues. First is Pilar French, a partner in our consumer financial services group in Portland, Oregon who closely falls legislative and regulatory developments affecting consumer lenders and bank fintech partnerships. Pilar represented a trade association that engaged our firm to track Oregon House Bill 4116 and also joining us today is Bert Rublin, a senior counsel in our group, consumer financial services group and a nationally recognized appellate lawyer with extensive experience litigating complex federal preemption issues. Indeed, Bert and I handled a series of cases in the 90s which dealt with the ability of FDIC insurance state banks to rely on section 27 of the Federal Deposit Insurance Act to export late fees and other fees allowed by their home states into a number of states prohibited or limited those fees. In the Colorado case, Bert and I filed the Mika Spreebes that we filed more than one so far on behalf of the American Bankers Association, Consumer Bankers Association and Bank Policy Institute. So this is how we'll proceed today. We'll start with Pilar who will discuss the Oregon legislation and then Bert will walk us through the Colorado litigation and his implications. So let's begin with Oregon. I'm very pleased to have two experts in this area unpack these developments and so I'm joined today by two of my valid SPAR partners. First is Polar French, a partner in our Consumer Financial Services Group in Portland, Oregon. State where all this is happening right now. Polar closely follows legislative and regulatory developments affecting consumer lenders and bank fintech partnerships and is a litigator by background and she has been involved in House Bill 4116 from the time it was introduced representing a trade association that was very closely tracking that bill. So very warm welcome to you Polar. Thank you. Thank you. So I need to introduce my other esteem colleague Bert Ruglin. Bert is a senior counsel in our group and a nationally recognized appellate lawyer with extensive experience litigating complex federal preemption issues. Indeed, Bert and I handle the series of cases going back to the 1990s which dealt with the ability of FDIC insured state banks to rely on section 27 of the federal deposit insurance act in order to export late fees and other fees on credit cards that were allowed by their home states very typically Delaware and South Dakota into a number of other states that prohibited or limited those fees. And in the Colorado cases I mentioned earlier Bert and I filed a Mika Spreeb's behalf as the American Bankers Association, Consumer Bankers Association and the Bank Policy Institute. Bert, very warm welcome to you. Thanks Alan. When you talk about the Greenwood Trust case back in 1992 you're showing our age. Yeah, I remember but the good thing is it's showing that we have good memory Bert so that's a positive. So Polar is going to end during this podcast is going to talk about the Oregon legislation and then Bert is going to walk us through the Colorado litigation and the implications of that of that litigation. So my first question to you Polar, it at the start is off. Could you explain to our audience what Oregon House built 41 16 does and why it is generated so much attention within the financial services industry? Well, certainly 41 16 basically opts out of Dindmica under section 525 which you so eloquently described previously. It basically enables Oregon to reimpose its own interest rate caps on loans made within their borders by FDIC insured state chartered banks. Okay, so during my introductory remarks I explain the opt out authority at least I quoted that key language loans made in such state but is there anything else you want to add to how section 525 of Dindmica operates if anybody is looking for section 525 I don't believe it's been codified in the US code I think it's like a footnote it's it's definitely part of the law but it's if you look at section 27 of the Federal Deposit Insurance Act it's not actually in section 27. Correct. Yeah so if anything you'd like to add to that. Sure there's a few things first of all let's talk about two parameters like the Colorado law this law expands the notion of where a loan is made we talked about that language in Dindmica a few minutes ago normally one would think that where the lender is located would be where the loan is made because the lender is the one that makes the loan but under this statute the loan is made in Oregon if it's made to a consumer who resides or maintains a domicile in Oregon and the consumer negotiates agrees to the terms of or enters into or executes a contract for a consumer finance loan of $50,000 or less by mail by telephone or via the internet while the consumer is physically present in this state or if the consumer makes a payment on a consumer finance loan of $50,000 or less in which a person debuts an account that the consumer holds in this state or the consumer makes a payment by means of a check drawn on a financial institution or trust company as those terms are defined under Oregon's statute so that's a really a mouthful of legalese there but basically it's the where the consumer lives if this consumer lives in Oregon that's going to be a defining term for whether 41 16 applies and then the other piece is that this legislation only applies to consumer finance loans of $50,000 or less. Right and my right would still a little strange about this but Oregon put in that bill is if you have an Oregon resident who's got a credit card when the consumer was an Oregon but then travels with the credit card goes you know to into Texas California of New York and Europe what what have you and then pays for it through a check drawn on a bank located outside of Oregon it sounds like that's not captured strangely enough not not covered by the statute if I heard you correctly well that could be an arguable point about why this law has some problems because people move around a lot these days where does your credit card come from is it is it you know is it is it from a national bank is it from a state chartered bank if it's a state chartered bank then this law is going to apply and then and then curiously the one marker that's notable and questionable is for unknown reasons to us the Oregon legislature did not decide to make this apply to credit unions which it could have done. Yeah let me just add one point that I want to move on and that is in my own view and I think even in the view of concealed out of most consumer advocates that really matter how Oregon defines how it's going to apply when you're dealing with Section 525 Section 525 is a federal statute and it would override any sort of sort of language in the House bill that talks about who would apply to and it's really a federal question as to where loans are made it's not a state law question but anyway let's put that aside so this opt-out authority polar existed beginning in 1980 and strangely enough unlike some other userry statutes that were enacted at the same time where cave states the right to opt-out but it put a limit of three years after the enactment of Dibnica for the opt-out to take place this one that left it open ended and it could very well have been a mistake by Congress rather than something that was intentional but they left it open ended and early on there were a lot of states that opted out right. A handful of states did opt out and then curiously most of them opted back in all but but Iowa which has been opted out since 1980. Yeah and I guess Puerto Rico but you're right there there were a bunch of them that opted out and I think shortly after that really didn't take a lot of time for them to realize how foolhardy the moves that was because and you know tired to go back now and reconstruct what the thinking was of each legislature but I think it probably had something to do with the the fact that national banks were not affected by Section 525 and it didn't make a lot of sense to reclude state-shattered FTIC insured banks but not national banks and there was nothing they could do about national banks. Okay, so moving on, if Oregon's governor signs this legislation as we all expect that she will, Oregon would fit within this very small group of states, right, that I've exercised the authority. I think you mentioned Colorado, of course, and Iowa and Puerto Rico. My right is that we got them all. I know there's a bill pending in Rhode Island but so far that hasn't gone anywhere. That's correct. It's Iowa, Colorado, maybe, Oregon, maybe, because we don't know, I mean, it's not an effect yet. And then Rhode Island has legislation pending. So Oregon is following Colorado and Iowa and Puerto Rico. What, what, what, it is speaking for Oregon itself because I mean, you were involved in following the legislation very closely. What concerns or policy goals appeared to be what drove this legislation? What, what was the, the bookie man? Why, what were they worried about in Oregon? Well, it was really, it was really interesting to listen to the, the legislative testimony, particularly of regulators, state regulators from the division of financial regulations. Their concerns were, the concerns were focused on a very limited sliver of loans, which are high interest rate short-term loans. And if I recall correctly, it was something like 2% of the loans that they see is what they were really concerned about. And the advocacy was for consumer protection. Right. And I assume the, the, the plot that there were a lot of out of state banks that were charging more than the 36% recap permitted under Colorado law. Under under under Oregon law, yes. Oregon law, of course. So you know, some commentators and suggestions that the legislation is aimed at what is pejoratively referred to as the rent of bank phenomena or bank fintech partnerships that exist where only because of the fact that an, not an out of state non bank has no exportation authority and they have to hook up with a bank, either a national bank or a state charter bank to take advantage of that exportation authority. Do you think I characterized that well? Well, that is the, that is the catchy sound by the proponents of this legislation are using. But really it is an inaccurate oversimplification of how loans are funded, originated and maintained in the United States. There are multiple contributors to our banking institution and how we make loans in this country. So you know, we're all a product of catchy sound bites these days with social media and that is just one that is attractive to advocates for this legislation. But unfortunately it's not really accurate. And this kind of legislation, loans are not simple. You can't, you can't simplify loans that way. It's unfortunate at least in my opinion that the legislature didn't take a breath and decide to study this and figure out whether this legislation would actually be good for consumers in the long run. So, Bert, let me bring you into the discussion for a moment. From a legal standpoint, Bert, when a state and the acts legislation like what Oregon did, is it essentially exercising authority that Congress expressed explicitly granted in Dimica? Well, yes and no. The answer is that yes, a state like Oregon, like Colorado does have the express right, if it's own client, to opt out of Dimica pursuant to Section 525. But from my perspective and that of the banks, that opt out right only applies with respect to loans made in such state, which in our view means that Congress was allowing states to limit their own state banks to the interest rates permitted in their state. And after an opt out, the state banks can no longer rely on Section 27 of the Federal Deposit Insurance Act to charge interest at the alternative rate of 1% above the discount. So, Bert, it is a practical matter. Our position, the industry position, is that they only could have opted out with respect to state charter banks that are physically chartered or located in Oregon. And it would preclude those banks from exercising exportation authority that is exporting the 36% rate permitted under the Oregon Usury Statute into other states that have lower usury ceilings, like Colorado, I guess. So, that's absolutely right. If they want to put limits or constraints on their own state banks, that's their prerogative. And that's what Congress was allowing states to do with the opt out right. But Congress was not allowing, was for a opt out state to limit the interest rates charged by state banks in other states. Right, right, right, got it. So, Polaro, let me go back to you. Assuming the governor again signs bill, what would be the practical effect on lenders making loans to Oregon residents out of state lenders? I guess they have a choice, right, that they could lower their rate to below 36% and comply. They're charging above that rate. They could just stop lending in Oregon, or they could continue to lend an array above 36% and probably get sued by the whoever, whether it be the Oregon Attorney General or the Oregon Department of Banking, they probably end up with a lawsuit. So, looks like they sort of got three options, right? Correct. They do have three options. Yeah. And this law would only be prospective in application, or could it also affect existing lending programs? How would that work? Well, the law is supposed to take effect June 4, 2026. That's 91 days after the end of the legislative session. Arguably, it should not apply retroactively to loans made prior to that date, but you raised some questions that give me pause, and I would have to think about it a little bit more. Credit card loans, for example. What happens if you amend the agreement? You would really have to dig down into what that loan agreement says. Make sure that the effective date of the loan is when you actually sign up for that credit card. And so, there are some questions about that, but I would weigh heavily in favor of the notion that it does not apply retroactively. That would raise a host of constitutional issues if it did apply retroactively. You mentioned credit cards. Colorado's bill has an exception for credit card lending, and I take it organ, there's got no exception. This applies to all types of loans. Yes. This law applies to consumer finance loans of $50,000 or less, and that's specifically defined by Oregon statutes. That means a loan or line of credit that is unsecured or secured by a personal or real property, and that has periodic payments and terms longer than 60 days. So I want to turn now to Colorado and Bert, can you start by walking our listeners through the Colorado case? How it arose, what the district court did, and what the 10th Circuit panel decided, and then finally, the most recent event is the 10th Circuit's grant of the plaintiffs petition for re-hearing on bank, which we filed another amicus brief. So if you could walk us through that chronological logically, I think that would be very helpful for our listeners. Sure, Alan. That's a lot of ground to cover, but I'm happy to do it. Colorado enacted its opt out legislation nearly three years ago in June of 2023, but the effective date was not until a year later on July 1st, 2024. In March of 2024, shortly before that effective date, the National Association of Industrial Bankers, the American Financial Services Association, and the American FinTech Council's FODL lawsuit in the Federal District Court in Colorado, seeking a declaratory judgment and a preliminary injunction to prevent the opt-out statute from taking effect. They argued in their complaint that the opt-out law was invalid because it attempted to regulate the interest rates charged to Colorado residents by out of state state banks, and that the opt-out under Section 525 of Dimica was intended to apply only to the opt-out states own state banks. In the District Court, there was extensive briefing and oral argument on the preliminary injunction motion, and then Judge Domenico of the District Court granted the Planets motion for preliminary injunction on June 18th, 2024, which was just two weeks before the opt-out statute was due to go into effect. He wrote a 28-page well-reasoned opinion that found that the key issue was the meaning of a language in Section 525 that Allen has already talked about, which is the meaning of the phrase "loans made in such state." Colorado had argued that a loan is made in both the bank state and the borrower state. The plan, on the other hand, argued that while a borrower obtains or receives a loan, only the bank makes a loan, and therefore the loan is made in the bank state. The Court found that the plan, as view, was more consistent with the ordinary colloquial understanding of who makes a loan, and more importantly, with how the words make and made or used consistently throughout the text of the Federal Deposit Insurance Act, including the Dimica amendments, as well as the rest of Title XII of the United States Code, which governs banks and banking. Judge Domenico also found that the play in ordinary answer to the question of who makes the loan is the bank, not the borrower. Thus, where a loan is made depends on the location of the bank, and where the bank takes certain actions, not on the location of the borrower, who obtains or receives the loan. Therefore, the judge held that Colorado could not limit the interest rates charged by out-of-state state banks, notwithstanding its opt-out from Dimica. Or before you get to the appeal on what happened in the 10th Circuit, there are a lot of additional arguments that were made by the plaintiffs, the trade associations, and that we made in our Amicus brief, and there was another, I think, Amicus brief, that was filed by somebody else. But the judge kept it very simple, didn't he? He didn't get into all of these additional arguments. Some of which were, I thought, really quite good. He just relied on this very simple argument that only a lender makes the loan borrower, as they never say, "I'm going to make a loan, they're going to gain a loan." Right? I think that's a pretty good characterization now, and I'm going to be talking in a couple of minutes about the various arguments made by the Amicus, when the case gets up to the 10th Circuit. But you're right, the judge Domenico, notwithstanding the fact that his opinion was 28 pages, his decision boiled down to who makes a loan, and that the common parlance and common understanding is a loan is made by a bank, and the borrower receives a loan or obtains a loan. So he kind of distilled it to his essence, didn't really delve into legislative history. The closest he talked about other issues was the fact that the opt out by Colorado had no effect on national banks. So of the purpose of Colorado's opt out was to prevent sky high interest rates being charged to Colorado borrowers by out of state state banks. That was not going to do anything. That opt out was not going to do anything to prevent sky high interest rates being charged by out of state national banks. So in effect, if that's an issue, you're not really fully addressing the issue. So he talked about that, but otherwise it was more focused narrowly on meaning of what is a loan is made. Yeah. All right. So let's go back now. He's issued his opinion. He's issued the preliminary instruction and the state of Colorado takes an appeal. All right. So Colorado takes an appeal in July of 2024. There's briefing and there's oral argument. And then the case just sits there for quite a long time and decision didn't come out until I would say about a year and a half later November 10th 2025. And the reason it took so long was it was a split decision, two to one. And both decisions, both the majority opinion that sending opinion were rather lengthy. The majority held that the district court got it wrong and reversed. It agreed with Colorado and it's a meeky and stated that the terms the loan, the term loans made in such state refers to loans in which either the lender or the bar or is located in the opt out state. The majority found that Congress intended to preserve significant state power to regulate all loans made to their residents, not with sending federal rate preemption granted under section 27. Now, as I said earlier, there was a decent. It was a very strong and very well reasoned dissent by Judge Rossman. And she argued that the majority's opinion conflicted with the statutory text, the legislative history of did maca and the purpose of section 525 opt out provision, which she read is limiting state opt out only to entrust state loans, originated by banks located within the state. Judge Rossman's dissent warned that the majority's approach undermined the uniformity and parity between state and national banks that Congress intended in 1981 and enacted did maca and would result in regulatory fragmentation across the 50 states of the country. What I found very interesting was that Judge Rossman's dissent cited and quoted several times from the amicus brief that Alan and I and our partner Ron Vasky submitted on behalf of the American Bankers Association, the Consumer Bankers Association and the Bank Policy Institute. Now, after the 10 circuit rendered its split decision, a petition for rehearing on Bunk was filed by the plaintiff trade associations on December 9, 2015. Colorado filed not position to the rehearing petition on January 21, 2026 and that rehearing petition then sat there for two and a half months and it was finally granted on April 2, of 2026. Now, getting a decision to grant rehearing on Bunk is very difficult. It requires a majority of the active non-senior judges to vote in favor of rehearing on Bunk. So grants of rehearing on Bunk are very, very rare and some circuits grant more than others and some grant less. The 10 circuit is one of those circuits that grants very, very few rehearing on Bunk. I would say fewer than 10 per year, perhaps considerably less than that. So that shows how significant they viewed this case. And I should mention that the effect of a grant of rehearing on Bunk is to vacate the panel decision. So that decision notwithstanding the fact that it's been published in F 4th is now vacant, it has no presidential effect. So let's talk about the MikaSprief that was submitted by our firm and the other MikaSpriefs, including one filed by the FDIC and another one surprisingly, at least surprisingly to me, filed by the Comptroller of the Currency, the Regulator of National Bax. Sure. Well, this case has engendered a lot of MikaSpriefs both at the district court level and at the 10th circuit. And MikaSpriefs were filed on both sides. You had, as Alan mentioned, a number of MikaSpriefs filed in support of the Plain of Banking Associations. But at the same time, you also had a number of state AGs who supported Colorado and a number of consumer organizations that supported Colorado. And that's both, as I said, at the district court and at the court of appeals level. Now, as I mentioned earlier, Alan and Ron Vasky and I filed a MikaSpriefs for the American Bankers Association, Consumer Bankers Association, Bank Policy Institute, and 52 state bankers associations. In our MikaSprief, we pointed out that just three months before the enactment of Dimica, the same 96th Congress had passed an amendment to the National Housing Act that preempted state user laws, but allowed states to override preemption as to certain FHA loans, "made or executed" close quote, in such state. So three months later, when it enacted Section 525 of Dimica, it used a much more lender-centric term, "made in such state," didn't say "made or executed" as they had three months earlier, but instead "made in such state." So we argue that that change in language was significant, because the Supreme Court has emphasized that differences in language convey differences in meaning. And that's particularly true when the different language appears in two statutes passed by the same Congress that relate to the same subject. Here, preemption of state user laws. laws and potential overrides the preemption. And again, it was the same Congress, the 96 Congress. And my right, I mean, this seems like, and I thought at the time we made the argument of very powerful argument, statutory interpretation argument. And it was not picked up by the District Court judge. And as far as I know, the majority who wrote that panel decision, it totally ignored it. And in fact, Alan Apropos of your comment, the majority interpreting the phrase "loans made in such state" relied on a definition of "made" which included the term executed. So from their perspective, the term "made" encompassed executed. But we raised this argument in our Amicus brief in support of rehearing on Bach. And for all I know, even though the rehearing order doesn't explain why they granted rehearing, it's just a simple order saying "rehearing" is granted. Perhaps the argument we made that I was just discussing with respect to this FHA amendment pre-monds earlier may have resonated with some of the judges. Our Amicus brief in addition to that argument also talked about the legislative history of Hitler in 1980. And we argued that the legislative history shows that Congress was focused entirely on creating interest rate parity between state and national banks in the same state in connection with interest state lending. And there was absolutely no discussion in the legislative history of interest rates charged on inter-state loans by out of state state banks. In fact, the lack of any such discussion was hardly surprising because state bank credit card and other inter-state lending didn't really take off until after the enactment of did in 1980. Finally, another argument that we made in our Amicus brief was that determining where a borrower is located, whenever credit is extended in a credit card or online transaction would create an unworkable morass, particularly when borrower was travel from opt-out states to non-opt-out states or vice versa. Now, as Alan mentioned a few minutes ago, there were other Amicus briefs and particular briefs filed by the FDIC and the OCC. Turning first to the FDIC, FDIC has been all over the map in this litigation. First, when the case went in the district court, the FDIC filed an Amicus brief in support of Colorado. And they agreed with Colorado that a loan is made both in the borrower state and in the bank state. That was during the Biden administration. That was during the Biden administration is correct. So the case goes up on appeal and Biden is still president and the merits briefing gets underway and the FDIC files another Amicus brief. Once again, taking the same argument in support of Colorado that a loan is made both in the borrower state and the bank state. Now, after President Trump took office in January of 2026, but before the 10th Circuit has oral argument, the FDIC withdrew that Amicus brief. It didn't provide any explanation. It didn't submit a new Amicus brief. It just said the Amicus brief we filed a couple months ago is hereby withdrawn. Now, after the 10th Circuit rendered its decision, the two to one decision we've talked about and trade groups filed for rehearing, the FDIC then filed Amicus brief in support of rehearing and supported the bank trade groups. Interestingly, that new Amicus brief didn't acknowledge the prior position that they had taken both in the 10th Circuit or in the district court. But instead, they simply said that Colorado's opt out only limits the interest rates that can be charged by Colorado state charter banks and cannot apply to out of state state banks. So they supported the grant of rehearing and they supported the plane of bank trade groups. Well, interestingly, though, bird, I want to want you to tell our audience that the FDIC, this isn't the first time the FDIC has taken the correct position. They took the correct position in the Greenwood Trust Company case versus Comma Walthamastatuzis case that you and I were involved in litigating quite some time ago, right? Yeah, we're showing our age, Alan, but way back in 1992, as Alan mentioned, Alan and I represented the issuer of the Discover Card and there was litigation in the first circuit. Massachusetts had originally opted out of Dindmica, then opted back in and there was some confusion in the briefing way back in 1992 as to whether Massachusetts was an opt out state or not an opt out state. But the FDIC did file an Amicus brief way back in 1992 in the first circuit and in that Amicus brief in the Greenwood Trust case, they said as follows, "Section 525 of Dindmica clearly does not confer on states that elect to opt out of Section 521, extra territorial authority to apply their own lending laws to loans made in other states by banks chartered in other states merely because the borrower happens to be a resident." So, Alan is correct in saying that the newest position by the FDIC, that is the Amicus brief in support of rehearing on Boc, is in fact consistent with the position they took back in 1992. So that was a long time ago, but that was obviously closer in time to Dindmica. So the FDIC has gone back and forth, but their current position is consistent with their original position way back when. So, the good news is the FDIC has recognized that this is a position they took long ago and they've clearly staked out their position. And then what about the comptroller? Well, yeah, it's interesting. The FDIC obviously regulates state charter banks, so the fact that they would file an Amicus brief either for Colorado or against Colorado is not surprising because state charter banks are within their purview. The OCC obviously regulates national banks, which derive their interest authority from Section 85 of the National Bank Act, but not with saying that the OCC also filed an Amicus brief in support of petition for rehearing on Boc and arguing that the majority got it wrong. And here's what they had to say. This is a statement from their brief. They said that the panel's decision fundamentally alters the application of the federal interest rate parity framework for state banks. Such an outcome would inject uncertainty into the framework, undermine the benefits that Congress sought to provide to state banks in Dindmica and create significant challenges for state banks that wish to lend across state banks. This outcome would also advantage national banks over state banks, which is inconsistent with Congress's expressly codified competitive equity goals. As a result, the panel decision threatens to diminish the vibrancy of the dual banking system and to harm consumers by reducing their access to credit across the country. For these reasons, the panel decision involves a question of exceptional importance. I mean, I've never seen in all the cases we litigated that you referred to the Greenwood Trust Company case, but we actually represented a whole bunch of state chartered FDIC-insured banks. We're litigating questions of what is the meaning of interest under Section 27 of the FDIA Act. The Comptroller filed briefs in the national bank cases. They were lawsuits then, class action lawsuits, attorney general lawsuits against national banks and state banks. The FDIC filed the Mika Spreeves in the cases involving the state banks and the OCC filed the Mika Spreeves in the cases involving the national banks. But I never recall the Comptroller ever filing an Mika Spree in a case involving the state banks back then. So this is really, I think, an unprecedented situation. Yeah, I would agree with you. So we've got, I've now talked about the Mika Spreeves that are firm filed for the bank trade groups. I've talked about the two bank agency Mika Spreeves. And also there was an Mika Spreev filed in support of rehearing by Utah and 19 other red states. As I mentioned earlier, there were a number of state attorneys general who filed in support of Colorado. And they were largely exclusively blue states. And at the same time, both at the merit stage and then subsequently in connection with the petition for rehearing on punk, you had Mika Spreeves in support of the bank trade groups, filed by Utah and 19 other states, which argued that the majority ruling was wrong and effectively allows one state to impose its interest rate regulations on every other state charter bank across the nation that loans money to a Colorado resident. And so that was a pretty significant brief as well. And right where that after the state of Colorado filed its opposition to the petition for rehearing on bank, there were no Mika Spreeves supporting Colorado. I think the lack of any Mika Spreeves in support of Colorado and its opposition to rehearing might have been strategic. I think even though there had been, like I said, a number of Amicus brief supporting Colorado at the merit stage, I think there might well have been a decision. Again, this is pure speculation. It could be a minor part. A decision made by Colorado and it's Amiki to basically tell the 10th Circuit, you know, this is no big deal and, you know, we don't need to have a whole lot of Amiki telling you that what you did was right. It's a plain vanilla statutory interpretation case because the more Amiki there are on both sides, you know, the more significant the case appears. It's talked now about the order of ranting rehearing on back because that basically identified for the parties, the core issues that they want to have briefed. Yeah, as I said earlier, the order merely says that a majority of the active non-senior judges voted in favor of rehearing on back. Doesn't give any reasons why and it does say that the panel decision is vacated and it sets out a briefing schedule. And what's interesting is it lays out six questions that it wants the parties and they're Amiki to address in the forthcoming briefing. And it's encouraging Amiki, right? Well, at the very end of the order and this is a rather unusual statement at the end of this order, it says, quote, "Amiki's participation is encouraged." Again, that is not a standard line. So let me just for the benefit of our audience quickly run through the six issues that the court has directed the parties and Amiki to address. One, does the phrase loans made in such state in section 525 of didmica refer to an executed loan and encompassed loans in which either the lender or the borrower is located in the opt out state. Two, how, if at all should the reference in section 521 of didmica to the state where the bank is located, inform the meaning of loans made in such state in section 525. Three, how, if at all, is didmica's enactment history instructive to interpreting the phrase loans made in such state. Four, how, if at all, is the regulatory guidance instructive to interpreting the phrase phrase loans made in such state. Five, is the phrase loans made in such state ambiguous. And six, finally, does a presumption against preemption apply in this case. In the meantime, the Colorado statute still remains state that is the injunction entered by Judge Domenico way back when in connection with his granite preliminary injunction. That remains in effect and it will remain in effect while this briefing continues and throughout any decision and what's likely to be a petition for sir. Right. Okay. Well, Bird, thank you very much for getting really providing our audience with the detail of how this case arose and where it is right now. It often can become after a case has been around for a couple of years. It can, it can be very confusing, but I think you did a terrific job in clarifying things. So, um, Polar, let's step back and look at the bigger picture here. If Oregon moves forward with this legislation, it seems like it will because it's going to get signed by the governor and other states begin considering similar measures. What could that mean for interstate lending by state charter backs? Well, you'll see a reduction of interstate lending by state charter banks because there will be loss in place that make it more difficult to make interstate loans. And, you know, really, the, the, it brings this whole circle. It's been interesting to listen to you talk about the political benefits, which is, you know, the changing position by the FDIC. Really it boils down to what, what does it mean? Where is alone made and Oregon in Colorado essentially are creating illegal fiction. They're changing the definition of that that making it that alone can be made where the borrower resides, even though a lender, not a borrower, makes the loans. So, you think about that if you're the lender, you have to try to figure out where, where the borrower resides each time you make a loan. And that is going to have significant ramifications for lending. As, as we mentioned earlier, this is, this is a complex industry loans once they're originated by a particular bank frequently don't stay with the originating bank. They're often sold. And so if you, if you want to sell the loan, you have to tack down this definition of where the loan is made before you sell it. Otherwise, it creates a risk in purchasing that loan. And whether the purchaser is then going to be subject not only to states where, where did maca applies, but also states where did maca doesn't and they're going to have to drill down and understand what those state laws are and what their restrictions are. This becomes very complicated and difficult from an industry perspective. And, you know, as I mentioned earlier in our podcast, there are a number of state charter banks, because we represent a number of them. And they're already looking into what's involved and converting to a national bank. And I would anticipate if this, you know, these laws get upheld Colorado and Oregon. Supreme Court doesn't get involved that they were going to see a lot of state banks convert to national banks. And you know, that what happens to the dual banking system, there are of course a number of state charter banks that are at lend locally that don't get involved in interstate lending and from their standpoint, this litigation is probably not all that important. But it's definitely important to those state banks to engage in interstate lending. Let's turn to what's happening at the federal level right now, Polar, because there is some stuff going on, right? The couple of bills have been introduced, one in the house and one in the Senate. And it's either for you, bird or Polar, it doesn't matter to me, whoever wants to answer it. What's happening there? Well, there is federal legislation that's been introduced that basically would take away that little language, that little footnote that allows states to opt out of did maca so that did maca applies to state charter banks and in credit unions across the board. I'm sure that Bert can give you some of the nuances and I mean, as I understand, there's some tricks and fixes that need to occur with that proposed legislation and I'll defer to Bert on that. Yeah, I think from a realistic standpoint, I don't think that legislation is going to go anywhere in Congress. I think Congress has got a lot of other priorities. Frankly, Congress is really not passing much in the way of legislation on any subject right now. So, A, it's not a priority, I think for Congress and B, I think the Democrats will be very much opposed to as proposed bill. And I don't know that there's enough of an appetite even among Republicans to push this through. So, it's interesting that the bill was introduced but I frankly don't see it passing Congress. Yeah, I guess the only thing I think that could change the calculus verb would be probably, it would have to take place after the election in November election. And there would have to be something that the Democrats absolutely needed to get passed and something that would prompt a deal to put together some legislation that would include among other things this bill that would, has the effect of repealing the, it isn't an actual repeal of 525. But from a practical standpoint, it would solve the problem that exists right now in the in Colorado and Oregon. That's the only way I see that happening. Okay, I think we've come to the end of our program today. So, let me close with just a few observations and takeaways from today's discussion. First, the Oregon legislation highlights that the opt-out provision that Congress included in DIMICA more than four decades ago is still very much alive and states may be increasingly willing to use it. Particularly what I refer to is the blue trifect of states. Second, the litigation currently pending. before the Court of Appeals for the 10th Circuit could, is likely going to provide important guidance about the limits of state authority to regulate interstate lending, involving out-of-state banks. The third observation, if additional states begin to follow Organs' lead, the industry could face a much more complex regulatory environment, creating a patchwork of state rules governing interest rates, and rules that could be very difficult for state banks to follow and to feel comfortable that they're in compliance with the law. And finally, these developments are all occurring at a time when bank fintech partnerships and interstate lending models are already facing heightened scrutiny from policy makers and regulators, particularly in the states. And we haven't had time today to get into all the bank fintech partnership regarding the true lender doctrine as to who is the real lender when you've got a bank fintech partnership, and that is something an issue that's been percolating for probably about 30 years and still has been resolved. So I want to thank my Ballard Spire colleagues, Pilar French, Bert Rublin for joining me today and sharing their insights. And I hope all of our listeners enjoy the remainder of their day. Thank you. (upbeat music)