A federal appeals court rules that Colorado can enforce its lending limits on out-of-state banks, setting a major precedent in consumer protection law.
Denver, Colorado, 11 November 2025 – Colorado has regained the authority to enforce its 36-percent annual percentage rate (APR) limit on payday loans and other forms of consumer credit, even when those loans come from banks based in other states.
In a key ruling this week, the 10th Circuit Court of Appeals decided that Colorado’s interest rate ceiling applies to all loans made to state residents, regardless of where the issuing bank is headquartered. The decision marks the latest development in a long-running legal and regulatory battle over payday lending and consumer debt protection in the state.
The case centered on how to interpret the 1980 federal Depository Institutions Deregulation and Monetary Control Act (DIDMCA). The law allows banks to charge interest rates permitted in their home state even when lending across state lines. However, DIDMCA also gives states the right to “opt out” of this rule and impose their own rate limits.
In 2023, Colorado lawmakers voted to opt out of this federal provision, concerned that payday lenders were partnering with out-of-state banks to bypass the state’s strict lending laws and offer high-interest loans to local borrowers. But before the rule took effect, three national financial trade groups filed a lawsuit to block it.
The trade groups argued that Colorado’s opt-out only applied to loans made by Colorado-based banks, not to out-of-state lenders. A federal district court initially agreed, halting enforcement. However, on Monday, a three-judge panel at the 10th Circuit reversed that decision in a split ruling, siding with the state.
“The Tenth Circuit decision honors Congress’s intent to give every state the power to protect its residents from predatory out-of-state loans,” said Andrew Kushner, an attorney with the Center for Responsible Lending. He added that this decision could inspire other states to take similar action against lenders who try to evade local usury laws.
The ruling is the first appellate decision to confirm a state’s authority over out-of-state loans, a move widely viewed as a victory for consumer advocates.
Not everyone, however, welcomed the outcome. The National Association of Industrial Bankers (NAIB), the lead plaintiff in the case, warned that the decision could create confusion and limit access to credit nationwide. “The Tenth Circuit’s ruling opens the door to a confusing patchwork of state laws that will make credit costlier and less available across the country,” said NAIB Executive Director Frank Pignanelli.
Fintech groups echoed that sentiment, arguing that the decision may restrict lending options for low- and middle-income consumers. “This decision puts Colorado consumers at risk of being cut off from safe, regulated financial services at a time when they need them most,” said Phil Goldfeder, CEO of the American Fintech Council.
Colorado’s attorney general’s office has defended the opt-out, saying it is essential for protecting residents from high-cost, short-term loans that can trap borrowers in cycles of debt. The state has been at the forefront of payday loan reform for over a decade, having passed multiple measures through both legislation and voter initiatives to cap interest rates and improve transparency in lending.
While the 10th Circuit’s ruling represents a win for state-level consumer protections, legal experts say it may not be the final word. The trade groups involved have said they are exploring all legal options for appeal, including potentially taking the case to the U.S. Supreme Court.
For now, Colorado’s 36-percent APR cap stands as a move that could reshape how fintech companies and out-of-state banks operate within the state’s borders, and perhaps beyond.
