November 11, 2025
The U.S. Court of Appeals for the Tenth Circuit has reversed a lower court injunction against the enforcement of Colorado's DIDMCA opt-out. The Depository Institutions Deregulation and Monetary Control Act of 1980, a federal law that permits state-chartered banks to export their interest rates into other states, allows states to "opt-out" of such exportation, effectively applying their state interest rate caps to these creditors. On June 5, 2023, the Colorado legislature passed House Bill 23-1229, which includes language that the interest and interest fee limitations function as an opt-out from Section 521 of DIDMCA. On March 25, 2024, three trade groups filed a complaint in Colorado federal court challenging Colorado's opt-out legislation. A federal district court granted the trade groups' motion for a preliminary injunction, which meant that Colorado was preliminarily enjoined from enforcing state-specific interest limitations against the members of the trade groups until the court determined the validity of the opt-out provision.
Colorado appealed and made three arguments against the injunction:
1. The DIDMCA does not have a cause of action that permits the filing of a lawsuit. (The Tenth Circuit rejected this argument.)
2. Colorado's opt out for "loans made in such State" (the language used in the DIDMCA) includes loans in which the borrower is located in Colorado.
3. The district court incorrectly balanced the harms to the parties.
The Tenth Circuit held that "loans made in such State" refers to loans in which either the lender or the borrower is located in the opt-out state. Because Colorado opted out of Section 1831d of DIDMCA, that statute no longer preempts Colorado's interest-rate cap for loans from out-of-state banks to Colorado borrowers. Therefore, the Tenth Circuit concluded that "(w)ithout Section 1831d's preemptive force, the rationale for the preliminary injunction falls apart. We have no basis under Section 1831d to enjoin [Colorado] from enforcing Colorado's interest-rate caps."
We expect the trade associations to appeal this decision.
Prior Alerts:
FDIC No Longer Supporting DIDMCA Opt Out in Colorado
Federal District Court Issues Preliminary Injunction Enjoining Colorado from Enforcing DIDMCA Opt-Out
Three Trade Groups Sue in Federal Court to Invalidate Colorado DIDMCA Opt-Out