Banks, Fintech Groups Sue Oregon Over 36% Rate Cap
The Depository Institutions Deregulation and Monetary Control Act of 1980 generally lets state-chartered banks apply the interest rates allowed in their home states when lending across borders, a framework widely used in bank-fintech partnerships. Oregon has capped consumer-finance loan rates at 36% since 2007. State regulators say lenders have made more than 31,000 above-cap loans totaling at least $61 million since 2020, making the dispute a test of federal preemption and states’ power to police high-cost online credit.
Governor Tina Kotek signed House Bill 4116 on April 7, 2026, and the measure took effect June 5, applying Oregon’s 36% ceiling to consumer-finance loans of $50,000 or less from out-of-state, state-chartered banks. The National Association of Industrial Bankers, American Financial Services Association and Online Lenders Alliance sued Oregon Department of Consumer and Business Services Director Sean O’Day in federal court on June 15. They seek to halt enforcement, arguing DIDMCA preempts the statute and that part of it violates the dormant Commerce Clause.
All Coverage
1 original reportsThe Backstory
The history behind this eventBanking Groups Challenge Oregon’s Interstate Rate Cap
Oregon’s House Bill 4116, signed by Governor Tina Kotek on April 7, 2026, took effect on June 5 and applies a 36% interest-rate ceiling to consumer finance loans of $50,000 or less. The measure targets out-of-state, state-chartered banks that use the Depository Institutions Deregulation and Monetary Control Act of 1980 to export home-state rates. Oregon regulators identified more than 31,000 above-cap loans totaling at least $61 million since 2020.
The National Association of Industrial Bankers, Online Lenders Alliance and American Financial Services Association sued on June 15 and sought a preliminary injunction on July 9. The American Bankers Association, Consumer Bankers Association, Bank Policy Institute, America’s Credit Unions and 50 state bankers associations subsequently filed an amicus brief. They argue Oregon’s opt-out should cover only loans made by Oregon-chartered banks and that extending the cap to banks chartered elsewhere would disadvantage state banks while leaving national banks’ rate-exportation authority intact.
Oregon Closes ‘Rent-a-Bank’ Loophole With HB 4116
Oregon has capped interest rates on consumer finance loans at 36% since 2007, covering unsecured small-dollar loans with terms of 60 days or more. Some online lenders and fintech firms nonetheless partnered with state-chartered banks in jurisdictions with looser rules, using the federal Depository Institutions Deregulation and Monetary Control Act of 1980 to export those banks’ rates into Oregon. The “rent-a-bank” structure allowed loans carrying triple-digit annual percentage rates, making the issue a test of state authority over digital lending and consumer protection.
The Oregon Legislature completed passage of HB 4116 on March 5, 2026. Governor Tina Kotek signed it on April 7, and the law took effect June 5, opting Oregon out of DIDMCA’s rate-export provision and clarifying that online and out-of-state lenders must follow the state’s 36% cap. The Oregon Division of Financial Regulation said it had identified more than 31,000 above-cap loans totaling at least $61 million since 2020, with some APRs exceeding 100%. The agency also cited a recent enforcement settlement requiring $900,000 in restitution.
Subscribe to Mark Radar Weekly
Every Friday, the week's strongest signals in your inbox. Unsubscribe anytime.