Stopping rent-a-bank lenders from evading Colorado’s consumer protection laws

How Colorado is on track to become the 2nd state to opt-out of a system that allows online lenders to charge more than state law allows.

Micheile Henderson |

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In 49 states, online lenders can legally partner with a bank in a different state and use that other state’s interest rates.

For example, Colorado law caps the APR on a $8,000 loan over 3 years at 21.5%. But an online lender is legally allowed to partner with a bank in a different state that has a higher APR on those loans and charge more. This is called rent-a-bank.

When you are dealing with loans of thousands of dollars, even a small APR increase can cost thousands of dollars.

For example, under CO law, the total repayment costs on that $8,000 loan jumps from $10,900 to $13,200 if the lender can use a different state’s laws and apply a 36% APR.

However, since the 80’s, Iowa has opt-ed out of this system.

And thanks to action in 2023, Colorado will too, becoming only the 2nd state (plus Puerto Rico) that has chosen to protect their laws and their state’s borrowers from rent-a-bank lenders.

We need to continue to defend and to refine our regulatory system so that everyone is protected. Phil Weiser
Colorado Attorney General

You can find our full webinar below

Recognizing the opportunity that we have to protect Coloradans, so that when they're in the moment of crisis, right, whether it is your fridge goes out, whether it's, you know, a car repair...whatever the thing is, that folks are protected by the statutes we've established here in CO...that's why I signed up for this fight. Julies Gonzales
Colorado State Senator and cosponsor of HB23-1229
This was a loophole we had to fix...because we have decent laws here...but what good do the consumer lending protection laws that we have do if they can be stepped around very easily by this provision of federal law. Mike Weissman
Colorado State Representative and cosponsor of HB23-1229

How states can stop rent-a-bank lenders in their states

The federal Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”) allows state-chartered banks to export to other states the state usury limits applicable in the state where the bank is headquartered.

However, it allows state’s to opt-out – something Iowa did in the early 1980’s.

So, for 40 plus years, Iowa has ensured that if you are a state-chartered bank (in Iowa or elsewhere), you need to follow Iowa’s usury rate.

In testimony before the Colorado General Assembly and in a recent presentation on our webinar we hosted, former Director of Consumer Protection in Iowa, Jessica Whitney, spoke to the law’s success. Not only are Iowa borrowers better protected from lenders seeking to charge more than Iowa law allows, enforcement costs are lower, the state bank and credit union market is robust and there is little evidence that consumers are missing access to important credit services or products.

Colorado is now poised to join Iowa. In 2023, the legislature, led by State Representatives Mike Weissman and Javier Mabrey and Senator Julie Gonzales, passed HB23-1229 triggering the opt-out effective July 1, 2024.

Online lenders should respect Colorado’s usury laws.

I’m proud Colorado is the 2nd state to take action – standing up for Colorado’s laws and Colorado consumers.


Danny Katz

Executive Director, CoPIRG

Danny has been the director of CoPIRG for over a decade. Danny co-authored a groundbreaking report on the state’s transit, walking and biking needs and is a co-author of the annual “State of Recycling” report. He also helped write a 2016 Denver initiative to create a public matching campaign finance program and led the early effort to eliminate predatory payday loans in Colorado. Danny serves on the Colorado Department of Transportation's (CDOT) Efficiency and Accountability Committee, CDOT's Transit and Rail Advisory Committee, RTD's Reimagine Advisory Committee, the Denver Moves Everyone Think Tank, and the I-70 Collaborative Effort. Danny lobbies federal, state and local elected officials on transportation electrification, multimodal transportation, zero waste, consumer protection and public health issues. He appears frequently in local media outlets and is active in a number of coalitions. He resides in Denver with his family, where he enjoys biking and skiing, the neighborhood food scene and raising chickens.

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