On June 15, three trade associations filed a complaint in the U.S. District Court for the District of Oregon. The plaintiffs seek declaratory and injunctive relief against Sean O’Day, in his official capacity as director of the Oregon Department of Consumer and Business Services. The complaint challenges Section 1, subsection 3 of Oregon House Bill 4116, which took effect June 5. The complaint brings two claims. First, it alleges that Section 1, subsection 3, amending Or. Rev. Stat. § 725.015, is preempted by Section 521 of DIDMCA and violates the Supremacy Clause. The plaintiffs allege Oregon exceeded its Section 525 opt-out authority by attempting to apply Oregon’s 36 percent interest-rate ceiling to consumer finance loans “made in” other states by out-of-state state-chartered banks. Second, it alleges that subsection 3(b) violates the dormant Commerce Clause by reaching loans made outside Oregon when the borrower was not present in the state when the loan was made. The plaintiffs further allege the subsection purports to apply based on payments from accounts held in Oregon at financial institutions or trust companies, or by negotiable instruments drawn on such institutions.

As previously covered by InfoBytes, Section 1, subsection 2 of HB 4116 declares that Oregon does not want Section 521 of DIDMCA to apply to consumer finance loans made in Oregon. The complaint challenges subsection 3 as exceeding that opt-out by reaching loans made by out-of-state state banks. Section 521 permits a state bank to make interstate loans at interest rates up to the higher of two rates: the rate allowed by the laws of the state where the bank is located, or 1 percent above the Federal Reserve discount rate in that Federal Reserve district.

The complaint also cites a 2024 U.S. District Court for the District of Colorado preliminary injunction (previously covered by InfoBytes here). The injunction blocked Colorado from enforcing its interest rate limits against loans not “made in” the state. The complaint notes that the 10th Circuit later granted rehearing en banc and vacated the panel judgment (covered here). The plaintiffs assert that House Bill 4116 purports to apply Oregon’s 36 percent interest rate ceiling to consumer finance loans of $50,000 or less. They allege the provision reaches loans made by state banks in other states to consumers who reside in or maintain a domicile in Oregon. The complaint further alleges that because House Bill 4116 does not affect national banks’ separate rate authority under Section 85 of the National Bank Act, the law would disadvantage out-of-state state banks in competing for consumer finance loans in Oregon.

The plaintiffs ask the court to declare that enforcement of Section 1, subsection 3 against out-of-state state-chartered banks is preempted by Section 521 of DIDMCA and violates the Supremacy Clause. They also ask the court to declare that subsection 3(b) violates the dormant Commerce Clause when applied to loans made in other states while the borrower is not present in Oregon when the loan is made. They also seek preliminary and permanent injunctions barring enforcement against out-of-state state banks that make consumer finance loans of $50,000 or less in other states to Oregon residents or persons domiciled in Oregon.