OR: Testimony in Opposition of OR HB 2561

TO: Oregon House Committee on Commerce and Consumer Protection
FROM: Phil Goldfeder, CEO, American Fintech Council (AFC)
DATE: January 28, 2025 SUBJECT: House Bill 2561

Position: Oppose.

Testimony:

Thank you, Chair Sosa, Vice-Chairs Chaichi and Osborne, and members of the House Committee on Commerce and Consumer Protection for providing me the opportunity to testify before you in opposition to House Bill 2561 (HB 2561). My name is Phil Goldfeder, I served as a senior advisor to Senate Minority Leader Chuck Schumer, and I am a former state legislator from the state of New York. I now continue in my public service as the CEO of the American Fintech Council (AFC).

As CEO of a standards-based trade association representing responsible fintech lending companies of all sizes and their innovative bank partners, I recognize that not all bank-fintech partnerships are created equal. While the impact of this bill may not directly impact AFC’s membership, because it only applies to loans in excess of Oregon’s 36 percent interest rate cap, we oppose the use of opting out of DIDMCA, as an instrument to protect consumers, because it is a blunt and legally questionable legislative solution for an issue that requires nuance.

Simply put, HB 2561 will diminish access to credit for Oregon families and put Oregon Banks at a severe disadvantage. Under the current law, state-chartered community banks can partner with fintech companies to offer much needed, safe and affordable access to credit. This bill upsets the competitive balance in the financial services industry and puts state-chartered banks at a significant disadvantage as compared with national banks. Oregon interest rate caps apply only to state-chartered banks; regardless of this bill national banks can continue charging at the higher rates permitted under federal rules.

It is important to note that this bill is based on the ideas of a small group of Iowa lawyers, who claim that Iowa’s decision to opt-out of rate exportation allowed in the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) proved beneficial for their consumers, without proving that with any data. However, based on an analysis of AFC’s members, each year at least 250,000 Iowans are missing out on loans at responsible rates, totaling approximately $300 million. This hardly seems like a robust lending environment. It is exactly for this reason that in the 1980’s, after the passage of DIDMCA, 8 states opted out of the law and quickly reversed and 6 opted back in.1

If passed, HB 2561 will decrease access to responsible credit as it did in Iowa, put Oregon based community banks at a disadvantage and leave many Oregonians— particularly those in minority communities— with no option but to rely on far too many predatory alternatives. Consumers once responsibly served through bank-fintech partnerships will now either have no option for credit or be forced to engage with higher priced lenders or nationally chartered banks that are not beholden to Oregon interest rate caps.

In addition, last year, together with other trade associations, the American Fintech Council brought legal action against the state of Colorado for their action on a similar bill. We have already won our preliminary injunction and are optimistic we will be successful in the appeals court. Opting out of DIDMCA with the broad effect Oregon intends is not legally valid, nor is it sound public policy. Oregon, like Colorado, does not have the right under DIDMCA to set rates and fees for state-chartered banks that are not actually making loans, as defined under federal law, in Oregon. This bill HB 2561 would face the same legal issues as the Colorado law if passed.

I do not want the same scarcity of lending options in Iowa to befall Oregon consumers as well, nor do I want Oregon to face the same legal challenge as Colorado. Therefore, I respectfully request that this committee table this bill to consider the nuance needed to properly solve the issues discussed and not harm the hundreds of thousands of Oregon families being responsibly served by AFC members. I thank you again for the opportunity to raise my concerns regarding HB 2561 and I am open to answering any questions.

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1 Upon initial passage of DIDMCA, Colorado, Iowa, Maine, Massachusetts, Nebraska, North Carolina, Puerto Rico, and Wisconsin opted out. However, all jurisdictions other than Iowa and Puerto Rico rescinded their opt-outs.