American Fintech Council (AFC), American Financial Services Association (AFSA) and the National Association of Industrial Bankers (NAIB) Challenged Colorado’s Interest-Rate Caps on Out-of-State Banks to protect financial access for Colorado families

U.S. District Judge Daniel D. Domenico found that the trade groups “have made a strong showing that they are substantially likely to succeed on the merits of their preemption claim.”

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WASHINGTON, D.C. (June 20, 2024)– In a major victory that will help preserve access to credit for Colorado consumers who need it most, a federal judge has preliminarily enjoined a Colorado statute that imposes interest-rate and fee caps on loans made to Colorado residents by state-chartered banks located outside Colorado.

Three leading financial services trade organizations — the American Fintech Council, the American Financial Services Association, and the National Association of Industrial Bankers — sued in March, asserting the Colorado statute is plainly invalid because it is inconsistent with federal law. Granting plaintiffs’ motion for a preliminary injunction, U.S. District Judge Daniel D. Domenico found that the trade groups “have made a strong showing that they are substantially likely to succeed on the merits of their preemption claim.”

“The decision to grant a preliminary injunction is a victory for the Colorado families who deserve access to safe, affordable, and responsible financial options that best serves their needs,” said Phil Goldfeder, CEO of the American Fintech Council. “AFC’s diverse members represent a cross-section of responsible fintech companies and innovative banks that embrace transparency and have democratized financial services by creating critical access to financial services for families who need it most. If implemented, the law would have harmed Colorado consumers and put state-chartered banks at a disadvantage by severely limiting consumer choice and access to these responsible financial products.”

The new law, HB23-1229, was scheduled to take effect on July 1, 2024. It was enacted as part of a campaign to curb “predatory” lending by banks outside Colorado. But as explained in plaintiffs’ complaint and injunction motion, the cap on interest rates imposed by the new law applies far more broadly than Congress intended—to banks outside Colorado—and is therefore inconsistent with the federal Depository Institutions Deregulation and Monetary Control Act of1980 (DIDMCA) and undermines the competitive position of community banks. It also won’t advance the state’s goals since, as the decision granting an injunction points out, Colorado’s law would not have applied to national banks.

Plaintiffs’ members include responsible, ethical state-chartered banks that offer a wide variety of useful, familiar, everyday credit products to Colorado consumers, including personal installment loans, “buy now, pay later” (BNPL) loans, vehicle financing, and store-branded credit cards.

A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative BaaS banks. Our mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

The three trade organizations are represented by a team of lawyers from Davis Wright Tremaine LLP, Sullivan & Cromwell LLP, Holland & Knight LLP.