Moreno-Davidson Bill Seeks To Reverse Tenth Circuit And Restore Interest Rate Exportation Parity Between State And National Banks

On February 12th, Senator Bernie Moreno (R-OH) and Representative Warren Davidson (R-OH) introduced the American Lending Fairness Act of 2026, legislation designed to restore long-standing federal interest rate exportation authority for state-chartered banks and credit unions engaged in interstate lending. The bill directly responds to the Tenth Circuit's controversial 2-1 decision in National Association of Industrial Bankers v. Weiser which held that Colorado's opt-out of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA"), pursuant to Section 525, requires out-of-state, state-chartered banks and credit unions to comply with Colorado's usury limits when lending to Colorado residents.

If enacted, the legislation would effectively reverse that decision and clarify that a state's opt-out cannot be used to prevent state-chartered depository institutions located in states that have not opted out of DIDMCA from exporting the interest rate permitted by their home state.

This issue sits at the center of an ongoing, high-stakes dispute between the State of Colorado and out-of-state state banks engaged in lending to Colorado residents.

The Broader Dispute: Colorado's Opt-Out and Interstate Lending

Since its enactment in 1980, Section 521 of DIDMCA has permitted state-chartered, FDIC-insured banks to export the interest rate permitted by the state where the bank is located to borrowers nationwide — a framework designed to preserve competitive parity with national banks and support the dual banking system.

In 2023, Colorado exercised its authority under Section 525 of DIDMCA to "opt out" of Section 521. The state has argued that its opt-out means that out-of-state, state-chartered banks making loans to Colorado residents must comply with Colorado's interest rate caps, even if those banks are located in states that permit higher rates.

Industry participants — including the National Association of Industrial Bankers — challenged Colorado's position, arguing that the opt-out was intended to apply only to banks chartered in the opting-out state, not to banks chartered elsewhere. In their view, allowing a single state to impose its rate caps on out-of-state banks would undermine decades of settled expectations, disrupt interstate lending markets, and erode competitive parity between state and national banks.

The Tenth Circuit's 2-1 Decision

In 2025, a divided panel of the United States Court of Appeals for the Tenth Circuit sided with Colorado. The majority concluded that Colorado's opt-out requires out-of-state, state-chartered banks to comply with Colorado usury limits when lending to Colorado residents.

The unprecedented ruling marked a significant departure from the prevailing understanding of DIDMCA's exportation framework and created uncertainty for state-chartered institutions engaged in interstate lending. A petition for rehearing en banc is currently pending before the full Tenth Circuit. If granted, the panel opinion would be vacated. The rehearing petition is supported by the FDIC, OCC, American Bankers Association, Bank Policy Institute, and 20 states.

Regardless of the outcome of that petition, the introduction of the American Lending Fairness Act signals that Congress may step in to resolve the dispute legislatively.

What the American Lending Fairness Act Would Do

According to the sponsors, the bill would:

• Restore federal interest rate exportation authority for state-chartered banks and credit unions in interstate lending;
• Preserve states' authority to regulate institutions chartered within their own borders;
• Reinforce competitive parity between state-chartered and national banks;
• Prevent states from using DIDMCA opt-outs to impose their interest rate caps on out-of-state lenders.

In effect, the legislation would clarify that a state's opt-out does not authorize it to regulate the interest rates charged by state-chartered banks located in other states that have not opted out.

Industry Reaction

The bill has drawn broad support from banking, fintech, and credit union trade associations, including:

• The American Bankers Association
• The American Financial Services Association
• The Financial Technology Association
• The Online Lenders Alliance
• The American Fintech Council
• The Consumer Bankers Association

Supporters characterize the bill as restoring long-standing precedent, protecting consumers' ability to shop across state lines, and preserving the integrity of the dual banking system. They argue that a patchwork regime in which each state could effectively project its rate caps nationwide would shrink credit markets and raise borrowing costs.

Critics of exportation, including Colorado officials and consumer advocates, view the issue differently. They contend that state opt-outs reflect deliberate policy choices to protect residents from high-cost credit and that allowing exportation in the face of an opt-out undermines state sovereignty.

Why This Matters

At stake is far more than Colorado's interest rate caps. The dispute goes to the core of interstate banking and the competitive balance between state- and nationally chartered institutions.

If the Tenth Circuit's panel decision stands and is replicated elsewhere, other states could pursue similar strategies. Conversely, if Congress enacts the American Lending Fairness Act, it would reaffirm a uniform federal standard for interstate rate exportation and significantly curtail the ability of states to extend their usury laws beyond their borders.

For state-chartered banks, fintech partnerships, and credit unions, the outcome will shape lending models and compliance frameworks nationwide. For borrowers, the practical effects may be seen in the availability — and pricing — of credit products.

The coming months will determine whether this conflict is resolved by the courts or by Congress. Either way, the long-standing architecture of interstate lending under DIDMCA is now squarely in focus.

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