U.S. Federal Appeals Court Vacates Injunction Against Colorado Rent-a-Bank Rate Limits

The U.S. Congress passed the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) in 1980, allowing out-of-state banks to charge borrowers interest rates permitted in the states where the banks are chartered. After Colorado opted out of the relevant provisions, it sought to restrict the rent-a-bank lending model used in partnerships between banks and fintech companies, with implications for the nationwide interstate credit market.

The U.S. Court of Appeals for the Tenth Circuit recently vacated a preliminary injunction that had barred Colorado from enforcing its interest-rate limits and sent the case back for further proceedings. The ruling was not a final judgment in the state's favor. The vacatur has been stayed before taking effect, so out-of-state banks and their fintech partners may continue applying existing interstate rates for now. The courts have yet to clarify the scope of future enforcement.