Banking Associations Unite to Fight Oregon Rate Cap Law

Several banking associations filed an amicus brief Tuesday (July 28) supporting a case that challenges an Oregon law (House Bill 4116) that caps interest rates charged by out-of-state banks, according to a Wednesday (July 29) blog post by law firm Ballard Spahr.

The amicus brief was filed by the American Bankers Association (ABA), the Bank Policy Institute (BPI), the Consumer Bankers Association (CBA) and 51 state bankers associations, according to the post.

The amicus brief supports the plaintiff’s arguments and adds two other policy considerations, the post said.

First, the amicus brief argues that the changes made by the new law can apply only to loans involving a bank located in the state, not those in which only the borrower is in the state, according to the post.

Second, the amicus brief contends that Oregon’s law would create a competitive disparity between banks based in Oregon and those based in other states, per the post.

“This filing demonstrates overwhelming industry support for the plaintiffs’ challenge,” Ballard Spahr Senior Counsel Alan S. Kaplinsky and Senior Counsel Burt M. Rublin said in the post. “The participation of the ABA, BPI, CBA and virtually every state bankers association demonstrates that the banking industry views the Oregon litigation as extending well beyond a dispute over one state’s briefing law.”

It was reported in June that three trade associations representing industrial banks, online lenders and consumer finance companies filed a federal lawsuit challenging Oregon House Bill 4116, which took effect June 5 and attempts to cap interest rates at 36% annually on consumer loans of $50,000 or less, even when those loans are made by banks chartered in other states.

The plaintiffs are the National Association of Industrial Bankers, the Online Lenders Alliance and the American Financial Services Association.

Later, on July 9, the three plaintiffs filed a request asking a federal court for a preliminary injunction to stop Oregon from enforcing House Bill 4116 while the legal case moves forward.

It was reported July 15 that a separate but nearly identical case was already before a federal appeals court and that both cases turn on the question of where a loan is really made.