_{The American Lending Fairness Act is the banking industry's response to the 10th Circuit ruling that let Colorado enforce rate caps on out-of-state banks. If it fails, five more states are already in line to follow Colorado's playbook.}

Senator Bernie Moreno and Representative Warren Davidson, both Ohio Republicans, introduced the American Lending Fairness Act of 2026 this month to prevent states from imposing their interest rate caps on loans made by out-of-state chartered banks and credit unions.¹ The bill is a direct legislative response to the Tenth Circuit's November 2025 ruling in National Association of Industrial Bankers v. Weiser, which upheld Colorado's opt-out from the federal interest rate preemption framework that has governed interstate lending since 1980.⁶

This is not an academic policy debate. The bank partnership model that underpins roughly half of all fintech personal loan originations in the United States depends on federal rate exportation. If that framework fractures state by state, the $253 billion unsecured personal loan market faces segmentation, and every lender relying on a bank partner for rate preemption needs a new compliance strategy or a new business model.¹⁰

Key Developments:

The short answer: because a federal appeals court broke a 40-year consensus in November 2025, and the banking industry panicked.

The longer answer requires understanding three pieces of legal infrastructure. First, the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) gave state-chartered, FDIC-insured banks the same interest rate exportation authority that national banks enjoy. A state-chartered bank in Utah can charge its home-state rate to a borrower in Colorado, regardless of Colorado's usury laws. This created the competitive parity that enabled interstate lending to scale.

Second, Congress included Section 525, which lets individual states opt out of this preemption. For four decades, almost nobody used it. Seven states and Puerto Rico initially opted out in the 1980s; six reversed within a decade. Only Iowa and Puerto Rico maintained their opt-outs. The provision was treated as a dead letter.⁹

Third, the Madden v. Midland ruling in 2015 cracked open a different vulnerability. The Second Circuit held that when a non-bank entity purchases loans from a national bank, the bank's rate preemption does not transfer to the buyer.⁵ A Columbia-Stanford-Fordham study documented the fallout: hundreds of loans were being made to borrowers with FICO scores below 640 in Connecticut and New York before the ruling. After it, zero.¹⁵ Regulators patched Madden with the valid-when-made rule in 2020, but the episode showed how quickly credit markets contract when preemption is challenged.

Colorado reactivated the dormant Section 525 opt-out in 2023, effective July 2024. The industry sued immediately. A district court blocked the law with a preliminary injunction. Then the 10th Circuit reversed the injunction in a 2-1 ruling last November, declaring that a loan is "made in" an opt-out state if either the lender or the borrower is located there.⁴ That ruling told every other state: you can do this too. The American Lending Fairness Act is the legislative attempt to close that door before more states walk through it.

The bill restores federal interest rate preemption for state-chartered banks and credit unions engaged in interstate lending. Specifically, it would prevent states from using DIDMCA Section 525 opt-outs to impose local rate caps on loans made by out-of-state institutions.^{1 6}

For alternative lenders, what matters is not the direct text of the bill but what happens to your bank partnerships. If you originate through a state-chartered bank partner (FinWise, TAB Bank, CC Bank, Cross River, or similar), your ability to charge rates above local usury caps in borrower states depends entirely on federal preemption holding. Colorado's 21% general cap and 36% supervised lender cap would apply to your state-bank-originated products in Colorado if the opt-out stands. Multiply that by five or six more states, and you are looking at a patchwork where the same product is legal in Ohio but usurious in Colorado, Minnesota, and Rhode Island.¹¹

If you originate through a national bank partner (which retains NBA preemption regardless of state opt-outs), you are insulated from this particular fight. But the pool of national bank partners willing to work with high-volume alternative lenders is smaller, and the compliance and oversight requirements are steeper. The bill's failure would push more demand toward fewer national bank partners, driving up partnership costs for everyone.

Deeply. Fintechs now account for roughly 50% of new personal loan originations by account balance as of fiscal year 2024.¹⁰ Total unsecured personal loan balances hit $253 billion across nearly 30 million loans in Q1 2025. A significant portion of that volume flows through bank partnership structures specifically to access federal rate preemption.

The National Consumer Law Center maintains a watch list of high-cost rent-a-bank lenders. The numbers are stark: OppFi charges APRs around 160% through FinWise Bank. EasyPay Finance charges up to 188.99% through TAB Bank. Elevate's Rise product runs 99-149% through FinWise and CC Bank. CNG Holdings (Check 'n Go) charges 145-225% through CC Bank.⁷

Two things are true simultaneously: these APRs look predatory to anyone outside the industry, and subprime borrowers locked out of traditional credit often have no cheaper alternative. The NCLC reports that two major rent-a-bank lenders, Elevate and OppFi, have charge-off rates exceeding 50%.⁷ When more than half your borrowers default, the "access to credit" argument gets harder to make with a straight face.

Here is the question MCA and RBF operators should actually be asking: does any of this apply to me?

Today, the answer is technically no. Colorado's DIDMCA opt-out (HB 1229) is explicitly limited to consumer credit transactions under the state's Uniform Consumer Credit Code. Commercial lending, MCAs, revenue-based financing, and factoring sit outside that definitional scope.⁴ No state has proposed legislation applying DIDMCA opt-out logic to commercial products.

But the firewall is being breached from the other side. Nine states have now enacted commercial financing disclosure laws (CFDLs) that apply consumer-style regulatory tools to business lending products. California's is the broadest: requiring APR disclosure (a concept borrowed directly from consumer lending regulation) for all commercial financing including MCAs, factoring, and RBF, with full DFPI enforcement authority. New York, Virginia, Utah, Connecticut, Florida, Georgia, Kansas, and Missouri have followed with varying scope.¹⁶

Meanwhile, state AGs are not waiting for legislatures. The Yellowstone precedent is actively spreading. New Jersey settled with Yellowstone for $27.4 million in January 2023, treating MCAs as unlawful loans. New York's AG won a $77.3 million judgment against Richmond Capital in September 2023, finding that MCAs were "criminally usurious loans." Then the $1.065 billion Yellowstone settlement in December 2024, the largest non-multistate consumer settlement in New York AG history. In April 2025, a Rockland County court vacated hundreds of Yellowstone judgments en masse. California's DFPI has levied over $100 million in fines against commercial financing providers including MCA companies.¹⁷

The legal framework these enforcement actions are building matters more than the DIDMCA opt-out for business lenders. Courts are establishing specific tests for when an MCA becomes a loan: fixed payments that do not approximate actual revenue percentages, reconciliation provisions that are never honored, personal guarantees that allow collection beyond "purchased" receivables. IFA Commercial Factor magazine characterized the trend bluntly: "the True Sale interpretation of the classic MCA contract will fade away."¹⁸

The states most likely to bridge the consumer-commercial gap next: California (broadest existing CFDL, most aggressive enforcement), New York (Yellowstone precedent plus active AG office), and Connecticut (narrow MCA-specific disclosure law combined with broad state consumer protection statutes). If you operate in those three states, your compliance exposure is already real, regardless of what happens with the American Lending Fairness Act.

At least five states are actively considering DIDMCA opt-outs: Minnesota (HF 3680), Rhode Island (S 2275), Nevada, Maryland, and Missouri.¹¹ Connecticut and Illinois have enacted related true-lender legislation that achieves similar results through different mechanisms. Florida introduced an opt-out bill that died in committee in March 2024, but the idea is not dead.

The 10th Circuit ruling is the catalyst. Before November 2025, states considering opt-outs faced legal uncertainty about whether their laws would survive a court challenge. The Weiser decision resolved that uncertainty in Colorado's favor. Now the only question for state legislators is political will, and consumer advocacy groups are actively lobbying in all the states listed above.¹²

The operational implications for lenders are concrete. At least 45 states and DC already cap rates on some installment loans. Over 35 jurisdictions (70% of states) set their cap at 36% or below for small-dollar products.¹² If those caps start applying to out-of-state bank-originated loans, every fintech using a bank partnership for rate exportation would need to either cap rates at local limits (making subprime lending unprofitable), exit those markets, or obtain direct state licenses in each jurisdiction.

The counter-coalition, led by Americans for Financial Reform, the Center for Responsible Lending, NAACP, ACLU, and the National Consumer Law Center, supports the Predatory Lending Elimination Act (Senator Jack Reed, D-RI), which would impose a federal 36% APR cap on all consumer loans.³

Their core arguments deserve honest engagement, not dismissal. First: Congress already established 36% as the responsible cap for active-duty service members through the Military Lending Act. If it protects soldiers, why not civilians? Second: charge-off rates above 50% at major rent-a-bank lenders suggest these products harm borrowers more than they help. Third: the exportation doctrine was designed to create competitive parity between national and state banks, not to enable non-bank lenders to evade consumer protection laws through partnership structures.

The counterargument from industry is equally straightforward: borrowers who cannot access 160% APR loans do not magically access 15% APR loans instead. They go to loan sharks, pawn shops, or nowhere. The Madden aftermath proved this. When legal lending disappeared for sub-640 FICO borrowers in Second Circuit states, bankruptcies rose.¹⁵ Restricting legal high-cost credit does not eliminate demand; it pushes it underground.

Both sides are presenting partial truths. The resolution depends on where you draw the line between "expensive but legal credit access" and "debt traps marketed as financial inclusion."

Moderate to low in its current form, and the timeline matters as much as the odds. Republicans control both chambers and the White House. The bill has broad financial services industry support, including all major banking and fintech trade associations. Both the FDIC and OCC filed amicus briefs supporting the industry position in the underlying Weiser case.⁹ The Trump administration's deregulatory posture is favorable: Treasury Secretary Bessent ordered an immediate halt to CFPB investigations and enforcement, and the administration has been unwinding Biden-era consumer finance rules.

But the bill has zero identified Democratic cosponsors. In the Senate, that means it cannot clear a 60-vote filibuster threshold without either bipartisan support or a reconciliation vehicle. The major reconciliation package (the "One Big Beautiful Bill") was already signed July 4, 2025, and did not include DIDMCA provisions. Interest rate preemption is primarily a regulatory question, making it a poor fit for reconciliation under the Byrd Rule. There is no obvious must-pass vehicle in the current congressional calendar to attach this to. The most likely next step is a Senate Banking Committee hearing (Senator Moreno sits on the committee), not floor action.

The court timeline is more concrete and arguably more consequential. The en banc petition in Weiser is fully briefed as of early February 2026. A decision on whether to grant rehearing is expected by Q2 2026 (April through June). If the full 10th Circuit denies rehearing, the industry has 90 days to file a Supreme Court certiorari petition, putting that filing around September 2026. If the Supreme Court takes the case, oral argument would likely fall in the October 2027 term with a decision by June 2028. That is an 18-24 month window of legal uncertainty at minimum.⁹

The most probable near-term outcome is that the bill serves as a political signal and negotiating tool rather than enacted law. Its value to the industry is in demonstrating Congressional intent, which can influence both the 10th Circuit rehearing and other courts considering similar questions. If the court reverses itself on rehearing, the urgency for legislation evaporates. If it does not, expect the bill to resurface in early 2027 with potentially broader support.

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The Bondoro U.S. Bankruptcy Court for the District of New Jersey on January 14, 2026 entered an interim order approving STG Logistics' approximately $294 million DIP facility—comprising $150 million in new money and a $144 million roll-up of existing term loan claims—finding the financing was "negotiated in good faith and at arm's length" and that the debtors were "unable to obtain financing on more favorable terms," while overruling all objections on the merits. The approval came over objections from minority lenders Axos Financial and Siemens Financial Services, who hold approximately $58 million in loans excluded from STG's October 2024 "drop-down and double-dip" refinancing and had won a significant ruling just nine days before the Chapter 11 filing when a New York court denied motions to dismiss twelve of their thirteen causes of action alleging the transaction violated "sacred rights" provisions requiring adversely-affected lender consent.

Figure Technology, the blockchain-based lending company that went public in September 2025 at a $5.3 billion valuation, confirmed it experienced a data breach after an employee was tricked through a social engineering attack, allowing hackers to download "a limited number of files" containing customers' full names, home addresses, dates of birth, and phone numbers. The hacking group ShinyHunters claimed responsibility on its dark web leak site, stating Figure refused to pay a ransom and publishing 2.5 gigabytes of allegedly stolen data as part of a broader campaign targeting companies that rely on single sign-on provider Okta—with other alleged victims including Harvard University and the University of Pennsylvania.

Thoma Bravo added a provision in documents tied to a $1.2 billion loan from private credit lenders backing its portfolio company Majesco's acquisition of cloud-based software provider Vitech, requiring lenders to alert the firm within three business days of any attempts to coordinate with other creditors in cooperation agreements—with those who fail to notify forfeiting voting rights on matters like amending credit terms or covenant waivers. The borrower-friendly deal, offered at just 4.5 percentage points over benchmark with options to reduce the spread, is also covenant lite, non-amortizing, and includes a payment-in-kind option—terms that underscore intensifying competition among private credit lenders and highlight what some warn are growing hazards in the market.