'For Heaven's sake, stop it': DIDMCA opt outs harm interstate commerce

• Key insight: In passing the Depository Institutions Deregulation and Monetary Control Act, Congress intended to create national rules that would guide lending across state borders. States can't simply opt out of them.
• What's at stake: The push for state-level opt-outs is a direct assault on the commerce clause of the U.S. Constitution. The founders intended the commerce clause to prevent exactly what we are seeing today: a balkanized "patchwork" where states erect protectionist barriers that impede the flow of national trade.
• Forward look: As the CFPB retreats, Congress and the courts must step in to reaffirm a coherent national framework. We cannot allow the dual-banking system to be shot down by a coordinated barrage of state-level mandates.

As Oregon joins Colorado in invoking an arcane provision to opt out of federal interest rate limits, the industry is still left communicating with carrier-pigeon efficiency in a fiber-optic world. Yup. The American dual-banking system is currently operating like Cher Ami, the legendary World War I carrier pigeon — blinded by jurisdictional crossfire and desperately trying to deliver a 20th-century message to a 2026 digital economy. With the 10th Circuit's recent decision to grant an en banc rehearing in National Association of Industrial Bankers v. Weiser, the fate of federal interest rate preemption is up in the air. By vacating a panel decision that threatened to dismantle "most favored lender" status, the court has stayed the execution of national banking parity.

The original message Cher Ami delivered through a storm of friendly fire read: "Our own artillery is dropping a barrage directly on us. For heaven's sake, stop it." Today, the financial services industry finds itself in a similar state of friendly fire. As the Trump administration continues to downgrade the Consumer Financial Protection Bureau, or CFPB, reducing it from a centralized regulator to a leaner, less interventionist agency, a vacuum has emerged. Nature abhors a vacuum, and so do ambitious state attorneys general. In the wake of federal retreat, states are launching their own regulatory barrages to include opting out of the Depository Institutions Deregulation and Monetary Control Act, or DIDMCA, Section 521 and effectively shelling the interstate banking channels that provide liquidity to their own citizens.

The push for state-level opt-outs, championed by Colorado Attorney General Phil Weiser, is a direct assault on the commerce clause of the U.S. Constitution. The founders intended the commerce clause to prevent exactly what we are seeing today: a balkanized "patchwork" where states erect protectionist barriers that impede the flow of national trade. This coordinated push for price controls functions as a de facto national policy without congressional consent. By attempting to regulate out-of-state institutions, Colorado is not "protecting" residents; it is reaching across state lines to dictate business models in Utah or Delaware, potentially harming every would-be borrower from California to Maine.

A call for federal intervention should not be taken lightly. Ordinarily, the laboratories of the states are where policy should be tested. However, national financial and banking policy represents a unique constitutional exception where federal preemption is not an overreach, but a requirement to preserve the integrity of the union. The founders did not design the commerce clause as a suggestion; they designed it to ensure that no single state could sabotage the economic machinery of the whole. In the digital age, where capital ought to be free to move at the highest possible speeds, allowing states to "opt out" of a unified interest rate framework effectively grounds the national credit fleet, forcing us into fragmentation.

When a bank in one state originates a loan to a borrower in another, it is the quintessential act of interstate commerce. If every state is permitted to opt out of federal preemption — a principle already under fire since the Madden v. Midland decision — the "most favored lender" status established by Congress in 1980 becomes a dead letter. We risk returning to a pre-DIDMCA era in which state-chartered banks are constrained by dozens of different rate caps, while their national bank competitors fly unimpeded under the National Bank Act. This disparity simultaneously harms banks and imposes an unconstitutional burden on the national economy by fragmenting credit markets into 50 distinct, isolated silos.

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The 10th Circuit's en banc review of the Colorado case offers an opportunity to correct this trajectory. The court must recognize that "loans made in such State" refers to the location of the bank, not the residence of the borrower. To hold otherwise is to invite a regulatory logistical nightmare where a single digital transaction must navigate a gauntlet of conflicting state laws.

Federal regulators appear to recognize the friendly fire for what it is. After previously withdrawing an amicus brief that supported Colorado's borrower-location theory, the FDIC has now filed an en banc brief supporting the industry plaintiffs. Its position is straightforward: For DIDMCA purposes, a loan is "made" where the bank is located and performs the non-ministerial functions of lending, not wherever the borrower happens to sit with a smartphone. That distinction matters. If borrower location controls, Colorado's opt-out does not merely restore Colorado law inside Colorado. It gives Colorado the power to dictate the rates charged by state-chartered banks located in Utah, Delaware, or anywhere else, while leaving national banks and federal savings associations on a different competitive footing.

The FDIC's intervention is an institutional warning from the primary federal regulator of state-chartered banks that the borrower-location theory would undermine the rate parity Congress built into DIDMCA. Congress did not create "most favored lender" status for state banks only to let any opt-out state erase it by redefining an interstate loan as local whenever the borrower crosses a digital border.

As the CFPB retreats, Congress and the courts must step in to reaffirm a coherent national framework. We cannot allow the dual-banking system to be shot down by a coordinated barrage of state-level mandates. It is time for the courts to receive the same message Cher Ami carried: For heaven's sake, stop it. Stop the barrage on interstate commerce before the damage to our national credit infrastructure becomes irreversible.