Appellate Court Upholds Colorado’s Power to Block Predatory Out-of-State Bank Loans

November 10, 2025 — Press Release

Tenth Circuit Court of Appeals Finds that Federal Law Allows States to Opt to Enforce Their Interest Rate Limits

DENVER – A panel of the U.S. Circuit Court of Appeals for the Tenth Circuit today held that Colorado can protect its residents from out-of-state loans from state-chartered banks that carry interest rates above what is permitted under Colorado law. Predatory rent-a-bank lenders charging rates up to 199% APR or higher have taken advantage of federal laws that allow banks to charge any rate permitted in their home state. Reversing the lower court, the appellate court held that states have the right to opt out of that federal law and to require out-of-state, state-chartered banks to comply with the interest rate caps of the consumer’s state. 

“The Tenth Circuit decision faithfully applies statutory text, and honors Congress’s intent, to give every state the power to protect its residents from predatory out-of-state loans,” said Andrew Kushner, Senior Policy Counsel at CRL. “With this clear guidance from a federal appellate court, other states can now follow Colorado’s lead to catch lenders trying to evade their usury laws.”

Colorado enacted its “opt out” law after rent-a-bank lenders like EasyPay Finance were laundering their loans through banks like Utah’s TAB Bank and charging 199% APR, which is unlawful in Colorado and almost every other state.  Some lenders that are not banks or credit unions use “rent-a-bank” schemes to circumvent state usury laws. In these schemes, the non-bank lender routes its loans through an out-of-state bank to end-run state usury law. The Tenth Circuit decision will allow Colorado to enforce its usury laws against both the non-bank lender and the out-of-state bank, ending the rent-a-bank ruse.

“This decision makes clear that Congress gave states the right to stop rogue, out-of-state banks from facilitating debt trap loans at rates of 199% APR,” said Lauren Saunders, associate director of the National Consumer Law Center. “More states should take a stand to protect their interest rate laws against evasions by predatory lenders.” 

The case, the first appellate decision on this specific issue, addresses the federal Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980. That law enabled state-chartered banks to “export” the interest rate laws of the state where the bank is located to other states; however, the law also permits states to “opt out” of this regulatory regime for loans “made in” the opt-out state. The Tenth Circuit decision holds that loans “made in” the opt-out state include those made by out-of-state banks to borrowers in the opt-out state, even if the bank is located elsewhere. In this conclusion, the Tenth Circuit agreed with Colorado, which appealed the preliminary injunction order, and an amicus brief filed by CRL and the National Consumer Law Center in support of the state.