Today, we released a new episode of the award-winning Consumer Finance Monitor Podcast examining one of the most significant recent federal developments in the fight against scams and fraud: Executive Order 14390.

Hosted by Alan Kaplinsky (the founder, chair for 25 years and now Senior Counsel in the Consumer Financial Services Group), the episode features returning guests Kate Griffin and Nick Bourke of the Aspen Institute, who previously joined the podcast to discuss Aspen's landmark report, United We Stand: A National Strategy to Prevent Scams.

Why This Episode Matters

Scams and fraud continue to impose staggering losses on American households, businesses, and financial institutions. As discussed in the episode, the Aspen report framed scams as a "whole-of-society" problem requiring coordination across government, financial institutions, technology companies, telecom providers, and civil society.

The new Executive Order appears to respond directly to that challenge by calling for:

• A coordinated federal anti-scam strategy
• Greater inter-agency cooperation
• Enhanced public-private information sharing
• Increased disruption of transnational scam networks
• Stronger victim restitution and recovery efforts
• More aggressive international enforcement tools, including sanctions and diplomatic pressure

In many respects, the Executive Order may represent the first serious federal attempt to build a national strategy to combat scams.

Key Themes Explored in the Episode

During the discussion, Kate Griffin described the Executive Order as the "starting gun" in the race against scams—an important signal that the federal government is now treating scams as a national priority.

Nick Bourke emphasized that success will require more than enforcement alone. He noted that regulators, financial institutions, telecom carriers, and digital platforms must be empowered to share information and intervene more effectively when suspicious activity is detected.

The conversation also examined:

1. Coordination Across Government

The Executive Order relies heavily on the federal government's National Coordination Center framework to align agencies such as the Departments of Treasury, State, Justice, and Defense. Whether that coordination translates into meaningful operational change remains to be seen.

2. Information Sharing and Safe Harbors

The guests explained that one of the largest barriers to scam prevention is the inability of private-sector participants to share threat intelligence quickly because of privacy, litigation, or antitrust concerns. Legislative or regulatory safe harbors may ultimately be necessary.

3. Targeting the Scam Business Model

Rather than focusing solely on individual fraudsters, the discussion stressed the need to undermine the economics of scams—making them harder, riskier, and less profitable for criminal enterprises to operate.

4. Victim Restoration

A particularly notable feature of the Executive Order is its call for a victim restoration program, which could help return seized assets to scam victims more efficiently.

5. Modernizing Law Enforcement Tools

The guests also highlighted the need to modernize legacy federal databases such as FBI and FinCEN reporting systems, many of which were designed before today's high-speed digital scam environment.

What Comes Next?

While the Executive Order is an important milestone, the guests agreed that additional action will be needed from Congress, regulators, and the private sector. A successful anti-scam strategy will likely require:

• Clearer legal pathways for data sharing
• Better consumer reporting systems
• Greater use of AI and analytics
• International cooperation
• Faster prosecutions and asset recovery
• Ongoing public education efforts

Bottom Line

This episode makes clear that scams are no longer simply a consumer-protection issue, they are now a national economic security issue. The White House has taken an important first step, but whether the Executive Order produces meaningful results will depend on execution, follow-through, and sustained cross-sector collaboration.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.

In the final episode of our Debt Sales 101 mini-series, we focus on what happens after a debt sale closes and how sellers manage ongoing compliance, oversight, and risk. We discuss how regulators view debt sales as a managed activity rather than a clean exit and what that means for post-sale responsibilities.

From a regulatory perspective, sellers are expected to maintain reasonable oversight of buyers, particularly where consumer harm could arise. We discuss key post-close considerations, including monitoring complaints, credit bureau disputes, litigation trends, and regulatory developments, as well as the importance of maintaining an ongoing diligence process for repeat transactions.

We also address practical risk management issues, including handling buybacks, responding to buyer requests for documentation, and mitigating the impact of adverse court decisions. One important theme is that patterns in complaints and litigation can signal broader issues, and proactive monitoring can help prevent regulatory scrutiny or downstream risk.

The key takeaway from this final episode is that debt sales do not end at closing. They evolve over time. Successful programs treat debt sales as an ongoing process, with continuous feedback loops, documentation support, and compliance oversight. This approach helps protect brand, improve pricing, and strengthen long-term relationships with buyers.

In the episode of Consumer Finance Monitor Podcast being released today, we explore the White House's National Policy Framework for Artificial Intelligence published on March 20, 2026. This new framework represents the Administration's most concrete attempt yet to shape the future of AI governance in the United States. While it does not carry the force of law, it offers a revealing look at the policy direction the Administration hopes Congress will take.

Joining our host, Alan Kaplinsky (founder, chair for 25 years and now Senior Counsel of the Consumer Financial Services Group), for this discussion were Charlie Bullock (Senior Research Fellow at The Institute for Law and AI), Kristian Stout (Director of Innovation Policy at the International Center for Law & Economics), and Greg Szewczyk, head of Ballard Spahr's Privacy and Data Security Group. Below are the key takeaways from the conversation.

From Principles to Policy: A Clear Shift

One of the most striking aspects of the new framework is how sharply it departs from last year's more principles-based "White House AI Action Plan." That earlier effort emphasized risk awareness, governance principles, and a balanced approach to innovation and regulation. On October 30, 2025, we produced a webinar entitled: "AI in Financial Services: Understanding the White House Action Plan – and What It Leaves Out", which featured the same speakers as the podcast being released today, plus Dean Ball, former White House senior advisor and one of the architects of the White House AI Action Plan. This webinar was then re-purposed into a two-part podcast series released on December 4 and 10, 2025.

By contrast, the new framework is short, just a few pages, light on detailed policy prescriptions, and heavily focused on limiting regulation, particularly at the state level.

As Charlie Bullock observed, the document is notable as much for what it doesn't include as for what it does. Rather than proposing robust federal oversight, it largely outlines areas where the government should refrain from acting.

Federal Preemption Takes Center Stage

The framework's most consequential and controversial feature is its strong endorsement of federal preemption of state AI laws.

It proposes broad preemption in areas such as:

· AI development

· Liability for third-party misuse of AI systems

· Restrictions on AI-enabled activities that would otherwise be lawful

At the same time, it preserves certain state authorities, including:

· Zoning and infrastructure decisions

· State use of AI

· "Generally applicable" laws (e.g., fraud, consumer protection, and child safety)

This raises a critical question: How meaningful are these carve-outs? As we discussed, broadly worded exceptions, particularly for state "police powers", could significantly limit the practical reach of federal preemption and potentially preserve a patchwork of state regulation.

The Patchwork Problem Isn't Going Away

Even with federal action, the reality is that state-level AI regulation is already underway. Laws like Colorado's AI Act and emerging chatbot regulations illustrate how quickly states are moving.

Greg Szewczyk noted that, unlike privacy law, where states have largely converged around similar frameworks, AI regulation could diverge in more fundamental ways. Without a consistent federal baseline, companies may face:

· Increased compliance costs

· Operational complexity

· Uncertainty in deploying AI tools across jurisdictions

Interestingly, some state regulators (including Democrats) may ultimately favor a well-crafted federal preemption regime if it provides clarity without sacrificing core protections.

Innovation First—But Who Benefits?

The framework strongly emphasizes:

· AI infrastructure buildout

· Faster permitting

· Regulatory sandboxes

· Access to federal datasets

Kristian Stout highlighted that these priorities could accelerate innovation but they are not automatically startup-friendly. Large incumbents may benefit disproportionately due to:

· Greater access to compute resources

· Established compliance capabilities

· Ability to absorb regulatory costs

This tension between promoting innovation and preserving competition remains unresolved.

Child Safety, IP, and Free Speech: More Questions Than Answers

The framework touches on several critical areas but leaves key details unsettled:

Child Protection

It endorses tools like age verification and parental controls but offers little guidance on implementation. Compared to proposals like the Kids Online Safety Act (KOSA), the framework appears less aggressive and more preemptive of state innovation.

Intellectual Property

Rather than legislating, the framework defers to the courts on issues like:

· Fair use in AI training

· Output infringement

This "wait and see" approach avoids premature policymaking but prolongs uncertainty.

Free Speech

A novel component aims to prevent government "jawboning" of AI providers; i.e., informal pressure to shape outputs. While rooted in legitimate First Amendment concerns, its ultimate scope and constitutionality remain unclear.

No New AI Regulator—For Now

The framework rejects the creation of a centralized AI regulator, instead relying on existing agencies.

This approach has clear advantages:

· Agencies already understand their sectors

· Avoids bureaucratic duplication

But it also raises concerns:

· Limited technical expertise

· Resource constraints

· Inconsistent oversight across agencies

As discussed, a hybrid model, combining agency expertise with centralized technical guidance, may ultimately emerge.

Will Anything Actually Pass?

Perhaps the most sobering takeaway: major AI legislation is unlikely in the near term.

As Charlie Bullock put it bluntly, companies should not invest significant resources preparing for this specific framework. The political reality is:

· Deep divisions within and between parties

· Limited legislative bandwidth before the midterms

· Competing proposals with very different philosophies

That said, elements of the framework may still surface incrementally in future bills.

The Anthropic "Mythos" Moment: A Glimpse of What's Coming

While not covered by the White House framework, our discussion closed with a timely real-world example: reports about Anthropic's advanced AI model, "Claude Mythos," capable of identifying and exploiting software vulnerabilities at scale.

Whether somewhat overstated or not, the episode highlights a broader truth:

· AI is accelerating existing capabilities, not inventing entirely new ones

· The pace of advancement is increasing rapidly

· Both risks and defensive tools are evolving simultaneously

As Kristian Stout noted, this is less a radical break than a compression of time and accessibility, making powerful capabilities available faster and to more people.

Final Thoughts

The White House AI Framework signals an important shift in U.S. policy thinking:

· Away from abstract principles

· Toward concrete (if still incomplete) legislative direction

It prioritizes innovation, federal uniformity, and limited regulation but leaves fundamental questions unresolved.

For industry participants, the key takeaway is not immediate compliance but continued vigilance. The direction of travel is becoming clearer, even if the destination remains uncertain.

We will closely continue to monitor developments closely on our blog, webinars and podcast shows. We will soon be releasing podcast shows with (1) Professor Mark Geistfeld of NYU Law School about ALI's relatively new project entitled "Principles of the Law Pertaining to Civil Liability for Artificial Intelligence" and (2) with Professor David Hoffman of the University of Pennsylvania Law School about an article he co-authored with the CEO of the American Arbitration Association entitled "Agentic Commerce Needs Legal Infrastructure, and the Courts are Coming."

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.

In Episode 5 of our Debt Sales 101 mini-series, we turn to contracting and closing, where legal structure, regulatory expectations, and commercial terms come together to define the transaction. We discuss the key provisions in a debt purchase and sale agreement and how those provisions allocate risk between buyers and sellers.

From a regulatory perspective, the contract is more than a commercial document. It is also an artifact that regulators expect to review. We explain how representations and warranties, indemnification provisions, buyback mechanics, and audit rights are used to address regulatory risk, confirm the scope of assets being transferred, and establish expectations around compliance and oversight. These provisions are central to demonstrating that both parties have appropriately considered legal and regulatory requirements.

We also discuss how contractual terms can directly impact pricing and execution. Restrictions on collection activity, credit reporting, or other post-sale actions can significantly affect the value of a portfolio. In addition, we cover key transaction mechanics such as data transfers, cutoff timing, and how contracts are introduced during the bidding process to align commercial and risk considerations early.

The key takeaway from this episode is that a well-drafted purchase and sale agreement does not just enable the transaction. It mitigates risk. By aligning regulatory expectations with commercial objectives, parties can create repeatable and scalable debt sale programs.

In this episode of the Consumer Finance Monitor Podcast, host Alan Kaplinsky (founder, former chair for 25 years and now Senior Counsel) had the pleasure of speaking with Sam Levine, Commissioner of the New York City Department of Consumer and Worker Protection (DCWP), about the agency's evolving role as one of the most active local consumer protection regulators in the country.

Important note: This podcast was recorded prior to DCWP's April 8, 2026 release of its proposed "click-to-cancel" rule addressing subscription practices. Alan recorded a description of the proposed rule which is at the end of the recording. We also wrote a separate blog about that significant development.

A Local Regulator with National Influence

From the outset, Commissioner Levine emphasized that DCWP is not simply a municipal agency focused on traditional licensing and enforcement, but rather a modern regulator tackling complex consumer protection issues that increasingly mirror those addressed at the federal level.

"Local enforcement can be incredibly impactful—we're often closest to consumers and can move quickly to address emerging harms."

He noted that New York City's scale and diversity make it a uniquely important testing ground for innovative consumer protection strategies.

Executive Orders Driving Enforcement Priorities

A key backdrop to DCWP's current activity is a pair of mayoral directives—Executive Order 9 and Executive Order 10—issued by New York City Mayor Zohran Mamdani on January 5, 2026 (shortly after he took office) which we have discussed in a prior blog post.

These Executive Orders signal a clear policy direction to fulfill his campaign promise to make life more affordable for everyday New Yorkers: an intensified focus on consumer protection, particularly in areas involving deceptive practices, hidden or "junk" fees, and recurring payment models. Executive Order 10, in particular, directs DCWP to prioritize enforcement against "subscription traps" and misleading recurring charge practices—laying the groundwork for the Department's subsequent proposed "click-to-cancel" rule published on April 8, 2026.

Commissioner Levine made clear that these directives are not merely aspirational, but are actively shaping the agency's enforcement and rulemaking agenda:

"We're aligning our work with the Mayor's directive to go after practices that frustrate consumers and undermine fair competition."

Enforcement Priorities: Targeting Deceptive Practices

A central theme of our discussion was DCWP's aggressive focus on deceptive and unconscionable trade practices, particularly in areas where consumers are most vulnerable.

Commissioner Levine highlighted the agency's work in combatting:

1. Hidden fees and misleading pricing practices

2. Predatory lending and financial services abuses

3. Worker exploitation in the gig economy

4. Emerging digital marketplace risks

"We're focused on conduct that distorts consumer choice—where people think they're getting one thing but end up locked into something very different."

He underscored that transparency and fairness are guiding principles behind DCWP's enforcement agenda.

Final Debt Collection Rules: A Significant Regulatory Development

We also discussed DCWP's recently finalized debt collection regulations, which we have analyzed in prior blog coverage. These rules represent one of the most significant updates to New York City's debt collection framework in years.

Commissioner Levine emphasized that the rules are designed to modernize existing requirements and address evolving industry practices, including the increased use of digital communications.

"The goal is to ensure that debt collection practices keep pace with how consumers actually communicate today, while maintaining strong protections against harassment and abuse."

Among other things, the rules clarify permissible communications, reinforce substantiation and disclosure requirements, and strengthen consumer protections in line with broader trends seen at the federal level.

These rules, which go effective later this year, apply not only to third-party collectors and buyers of consumer debt, but also to creditors of consumers whenever the debtor resides or is located in New York City.

Collaboration with Federal and State Regulators

Drawing on his prior experience at the Federal Trade Commission as Director of the Bureau of Consumer Protection, Levine discussed the importance of coordination across jurisdictions.

"There's a real opportunity for federal, state, and local regulators to work together and reinforce one another's efforts."

He explained that DCWP frequently collaborates with the FTC, the New York State Attorney General's Office, and other enforcement bodies, particularly in cases involving multi-state or national conduct.

At the same time, he made clear that local regulators can lead:

"We don't have to wait. If we see harm affecting New Yorkers, we're going to act."

Rulemaking as a Strategic Tool

In addition to enforcement, Levine emphasized DCWP's increasing use of rulemaking to shape market behavior proactively.

"Rules give clarity to businesses and protections to consumers—they're an important complement to case-by-case enforcement."

He noted that clear rules can help level the playing field for companies that are already trying to do the right thing.

Focus on Financial Services and Marketplace Innovation

The conversation also explored DCWP's interest in financial services, particularly as new products and delivery models emerge.

Levine pointed to risks associated with:

1. Fintech innovations that may outpace regulatory frameworks

2. Online platforms that obscure key terms or pricing

3. Products that rely heavily on consumer inertia or behavioral biases

"Innovation can be a good thing—but it can't come at the expense of transparency or fairness."

Practical Takeaways for Industry

For companies operating in or serving New York City, the message from DCWP is clear:

1. Expect active enforcement of deceptive practices

2. Monitor local regulatory developments, including mayoral directives and rulemaking initiatives

3. Prioritize clear disclosures and consumer-friendly processes

4. Anticipate continued focus on digital and subscription-based business models

"Our goal is straightforward: markets should work for consumers, not against them."

Looking Ahead

Although our discussion did not cover it because it happened after our podcast was recorded, DCWP has since proposed a significant new rule targeting subscription practices—further underscoring the agency's commitment to addressing modern consumer risks and reflecting the policy direction set by Executive Order 10.

Given Commissioner Levine's leadership and experience, including his prior role at the FTC, DCWP is likely to remain at the forefront of consumer protection innovation.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.

In Episode 4 of our Debt Sales 101 mini-series, we focus on the current regulatory landscape governing debt sales and how recent developments are shaping the market. We discuss how oversight has become more fragmented, more active, and increasingly driven by state regulators and attorneys general, and how that shift is affecting both buyers and sellers.

A central theme in this episode is that regulation is no longer a background consideration. It is a primary driver of pricing, deal structure, and buyer participation. We walk through key regulatory themes, including the importance of documentation and chain of title, increased product-specific scrutiny, and the growing focus on consumer outcomes and potential UDAAP risk. Regulators are increasingly looking upstream at sellers and their diligence, documentation, and oversight practices, rather than focusing solely on collectors.

We also discuss how these regulatory developments are affecting the economics of debt sales. Changes at the state level, as well as evolving rules in areas such as medical debt and student loans, have introduced additional compliance complexity and, in some cases, reduced pricing or limited buyer participation. At the same time, emerging product areas continue to evolve as buyers assess regulatory risk and opportunity.

The key takeaway from this episode is that understanding the regulatory environment upfront is critical to executing a successful debt sale. A well-structured process, supported by strong diligence, documentation, and contractual protections, is essential to managing risk and achieving expected value.

The latest episode of the Consumer Finance Monitor Podcast being released today tackles one of the most consequential developments in bank–fintech litigation in recent years: the Los Angeles Superior Court's tentative decision in Opportunity Financial, LLC v. Hewlett (read more here). This case squarely addresses the long-debated "true lender" doctrine which has for decades bedeviled banks and Fintechs and "bricks and mortar" non-banks that have entered into joint ventures with one another to engage in interstate lending programs which take advantage of interest rate exportation rights afforded to banks. After applying application California and federal law, the Court granted summary judgment to OppFi and against the California Department of Financial Protection and Innovation (DFPI) which unsuccessfully maintained that OppFi is the true lender and not OppFi's partner, FinWise Bank.

In this episode, host Alan Kaplinsky, founder and former chair of the Consumer Financial Services Group and now Senior Counsel, is joined by two leading voices with sharply contrasting perspectives: Professor Emeritus Arthur Wilmarth, a prominent critic of bank–fintech partnerships, and Ballard Spahr Senior Counsel Ron Vaske, who regularly advises banks and fintech companies on structuring such programs. Their discussion offers a deep and balanced exploration of the court's reasoning and its broader implications.

A Tentative Decision with Significant Implications

At the center of the case is a partnership between OppFi, a fintech platform, and FinWise Bank, a Utah-chartered, FDIC-insured institution. The program allowed FinWise to originate consumer loans at interest rates permissible under Utah law and export those rates nationwide under Section 27 of the Federal Deposit Insurance Act.

The DFPI challenged the arrangement, arguing that OppFi—not FinWise—was the "true lender," which would subject the loans to California's 36% interest rate cap.

In a tentative ruling, the court rejected the DFPI's position and granted summary judgment in favor of OppFi. The court emphasized traditional indicia of lending authority, including:

• FinWise's role in funding the loans

• Its control over underwriting criteria

• Its retention of a 5% ownership interest

• Its ongoing oversight of compliance and marketing

Critically, the court also relied on the longstanding California law principle that usury is determined at the inception of the loan. (See the discussion below.) Because FinWise originated the loans, the court concluded they were not rendered unlawful by OppFi's subsequent purchase of a 95% participation interest giving which gave it a predominant economic interest.

Competing Views on "True Lender"

The podcast highlights a fundamental divide in how courts and commentators approach the true lender doctrine.

Professor Wilmarth argues that the court failed to meaningfully engage with the "predominant economic interest" test, which focuses on who bears the majority of the economic risk and reward. In his view, OppFi's 95% participation interest suggests that it—not the bank—is the real lender in substance. He also raises broader concerns about whether such arrangements undermine state usury laws and expose consumers to excessively high-cost credit.

Ron Vaske, by contrast, emphasizes the legal and structural realities of the transaction. He underscores that FinWise is the named lender, funds the loans, and remains legally responsible to borrowers. From this perspective, the allocation of economic interests after origination should not redefine the identity of the lender or override federal law permitting rate exportation.

The Role of "Valid When Made"

Another key related theme explored in the episode is the "valid when made" doctrine—the principle that a loan that is lawful at origination remains lawful after assignment. The court's reliance on this concept reinforces the importance of determining lender status at the moment the loan is made, rather than based on subsequent transfers or participations.

The discussion also touches on the interplay between state and federal law, as well as the continuing relevance of regulatory interpretations following the Supreme Court's decision in Loper Bright, which curtailed Chevron deference.

What Comes Next?

It is important to note that the court's ruling is still tentative. In accordance with California procedure, OppFi must submit a proposed final opinion and order to the Court. If adopted, an appeal by the DFPI appears likely—potentially setting the stage for further appellate guidance on the true lender doctrine in California and beyond.

Why This Matters

This case is part of a broader and ongoing policy debate:

· Supporters of bank–fintech partnerships argue they expand access to credit and operate within well-established federal banking frameworks.

· Critics contend they can be used to circumvent state consumer protection laws, particularly interest rate caps.

As the regulatory and judicial landscape continues to evolve, OppFi v. Hewlett represents a significant—and closely watched—development.

It may be significant to note that, unlike several other states, California does not have a statute stating that the holding of a "predominant economic interest" in a loan makes the holder the true lender

Be sure to listen to the full podcast episode for a deeper dive into the case and the competing legal and policy perspectives shaping the future of bank–fintech partnerships.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.

In Episode 3 of our Debt Sales 101 mini-series, we discuss who buys charged-off debt and how debt sale transactions are typically structured. We explain how different buyers specialize in different asset classes and how buyers evaluate portfolios from legal, regulatory, and commercial perspectives.

From a buyer's perspective, purchasing debt is not just a credit decision. Buyers are underwriting legal and regulatory risk as much as they are underwriting expected recoveries. In this episode, we discuss the key factors buyers consider, including transferability and chain of title, collectability and applicable statutes of limitation, licensing requirements, and the broader regulatory environment that affects how accounts can be collected. These factors often drive pricing and determine whether certain buyers will participate in a particular sale process.

We also discuss how sellers identify the right buyer and why working with well-capitalized and experienced buyers can have a significant impact on execution and pricing. From there, we walk through the primary transaction structures used in the market, including spot sales and forward flow arrangements, and discuss how risk allocation, repricing risk, and portfolio segmentation are addressed in these structures.

The key takeaway from this episode is that debt sales are not one-size-fits-all transactions. The identity of the buyer, the structure of the deal, and the allocation of regulatory and commercial risk all directly affect pricing, execution, and long-term success of a debt sale program. In the next episode, we turn to the regulatory landscape and discuss how recent regulatory developments are shaping the debt sale market.

In this episode of the Consumer Finance Monitor Podcast, host Alan Kaplinsky is joined by colleagues Pilar French and Burt Rublin to unpack a rapidly evolving issue at the intersection of bank–FinTech partnerships and interstate lending: the renewed exercise of state opt-out authority under Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). Colorado enacted an opt-out statute in 2023 that is the subject of ongoing litigation before the entire Tenth Circuit Court of Appeals, and very recently the Oregon Legislature passed an opt-out bill as well.

The Podcast discussion highlights how a little-used statutory provision is now at the center of a major legal and policy debate—one that could reshape the landscape for state-chartered banks and the broader consumer finance industry.

The Foundation: Interest Rate Exportation Under DIDMCA

For decades, state-chartered, FDIC-insured banks have relied on Section 27 of the Federal Deposit Insurance Act—enacted through DIDMCA—to "export" interest rates permitted in their home states to borrowers nationwide. This authority mirrors the power granted to national banks under the National Bank Act and has been a cornerstone of interstate lending.

However, DIDMCA also includes a lesser-known provision—Section 525—that allows states to opt out of this federal framework for state banks with respect to "loans made in such state." For years, this provision attracted little attention. That is now changing.

Oregon's House Bill 4116: A New Wave of Opt-Out Activity

Oregon's recently passed House Bill 4116 represents one of the most significant modern uses of the DIDMCA opt-out provision. If signed into law, it would:

1. Reimpose Oregon's interest rate caps (generally 36%) on certain loans made to Oregon residents;

2. Apply broadly to consumer finance loans of $50,000 or less;

3. Expand the definition of where a loan is "made" to include the borrower's location—such as where the consumer resides or enters into the loan agreement.

Surprisingly, the law applies to state-chartered banks but excludes credit unions.

The legislation appears driven by concerns over high-interest, short-term lending, though testimony suggested that such loans represent only a small portion of the market. Critics argue that the bill oversimplifies complex lending structures—particularly bank–FinTech partnerships—through politically appealing but potentially misleading narratives.

The Core Legal Dispute: Where Is a Loan "Made"?

At the heart of both the Oregon legislation and ongoing litigation in the Tenth Circuit concerning the Colorado opt-out statute is a fundamental interpretive question: where is a loan "made" for purposes of Section 525 of DIDMCA?

1. Industry Position: A loan is "made" where the bank is located, because the bank is the entity that extends credit. Therefore, an opt-out by a state only enables it to impose its own usury laws on loans made by its own state banks and eliminates their ability to charge interest pursuant to Section 27 of the Federal Deposit Insurance Act.

2. Opt-out State/Consumer Advocate Position: A loan is "made" both where the bank is located and where the borrower resides. This means that an opt-out state can apply its own usury laws to interstate loans made to its citizens by state banks located in other states.

This distinction is critical. If the broader interpretation prevails, states that opt out of DIDMCA could effectively regulate interest rates charged by out-of-state banks to their residents—significantly curtailing interstate lending.

The Colorado Litigation: A Pivotal Case

Colorado's opt-out statute has become the testing ground for this issue, as it raises an issue that all sides agree is one of first impression.

1. A federal district court sided with industry plaintiffs, granting a preliminary injunction against enforcement of the opt-out statute and holding that only the bank's location determines where a loan is made.

2. A divided panel of the Tenth Circuit reversed that decision, adopting Colorado's argument that a loan is made in both the borrower's location and where the bank is located.

3. In a significant and very unusual development, last week the Tenth Circuit granted rehearing en banc, vacating the panel decision and ordering additional briefing for consideration by the entire Court.

The case has attracted substantial attention, including numerous amicus briefs on both sides from bank trade associations, consumer organizations, numerous Red and Blue State attorneys general, and federal bank regulators.

Federal Bank Regulators Weigh in With Amicus Briefs Supporting Rehearing En Banc

Both the FDIC and the Office of the Comptroller of the Currency have criticized the broader interpretation of DIDMCA's opt-out provision adopted in the now-vacated majority panel opinion by the Tenth Circuit.

1. The FDIC originally supported Colorado during the Biden Administration but then shifted its support to the banks' position during the second Trump Administration and filed an amicus brief that supported rehearing en banc and aligned with the industry view.

2. The OCC emphasized that the panel decision could undermine the goal of Section 521 of DIDMCA to create parity between state and national banks and would undermine the dual banking system and introduce significant uncertainty into the lending market.

These positions underscore the potential systemic impact of the case.

Practical Implications for State Banks Engaged in Interstate Lending

As a result of the enactment of the Oregon law and if additional states enact similar legislation, out-of-state banks lending to residents of a state which has enacted an opt-out statute may face difficult choices:

1. Comply with state-specific rate caps;

2. Exit certain markets altogether;

3. File a declaratory judgment action seeking injunctive relief against the state agency charged with enforcing the opt-out statute based on Federal preemption of such statute under Section 27 of the Federal Deposit Insurance Act.

The uncertainty extends beyond origination. Secondary market participants may face increased due diligence burdens, as determining where a loan is "made" becomes more complex—especially in an era of digital lending and mobile consumers.

Broader Industry Impact

The implications could be far-reaching:

1. Reduced interstate lending by state-chartered banks;

2. Migration to national bank charters to preserve rate exportation authority;

3. Fragmentation of the regulatory landscape, with a patchwork of state rules;

4. Increased compliance complexity for bank–FinTech partnerships and loan purchasers.

In short, the dual banking system could face renewed pressure if state-chartered banks cannot export their home state interest rates when making interstate loans to borrowers in opt-out states, which would deprive them of competitive parity with national banks.

What Comes Next?

Several developments will be critical to watch:

1. The outcome of the Tenth Circuit's en banc review;

2. Whether additional states follow Oregon's lead;

3. The potential for U.S. Supreme Court review;

4. Federal legislative proposals that could eliminate the opt-out provision altogether (though prospects for passage appear uncertain).

Key Takeaways

1. The DIDMCA opt-out provision, long dormant, is reemerging as a potential tool for states to regulate interest rates charged to their citizens by out-of-state state banks.

2. The determination of where a loan is "made" for purposes of Section 525 of DIDMCA is now a central legal battleground.

3. The forthcoming Tenth Circuit en banc decision will set an important precedent with nationwide implications.

4. A growing patchwork of state laws could significantly complicate interstate lending.

5. The future of bank–FinTech partnerships and the dual banking system may hinge on how these issues are resolved.

As these developments continue to unfold, financial institutions, regulators, and policymakers alike will need to navigate an increasingly complex and uncertain legal environment—one that may redefine the rules of interstate lending in the United States.

In Episode 2 of our Debt Sales 101 mini-series, we move from the "why" behind debt sales to the "what." Specifically, we discuss what types of debt can be sold, how portfolios are typically composed, and the legal and regulatory considerations that determine whether debt is appropriate for sale.

Not all debt is equally marketable, and not all accounts within a portfolio carry the same legal, regulatory, or operational risk. In this episode, we discuss the types of consumer and small business debt that are commonly sold, the types of specialty accounts that buyers may still be willing to purchase, and the categories of accounts that often raise diligence concerns, including accounts involving fraud, deceased consumers, pending legal matters, or other issues that can affect collectability or compliance.

We also discuss how buyers evaluate portfolios from both a business and regulatory perspective, including the importance of documentation, data quality, servicing history, and chain of title. Buyers are not just underwriting credit risk. They are underwriting legal and regulatory risk, and that evaluation directly affects pricing, deal structure, and whether certain accounts can be included in a sale at all.

A key theme in this episode is that portfolio composition is not just a business issue. It is a compliance and risk management issue as well. The types of accounts included in a sale, how those accounts were serviced prior to sale, and the documentation that supports them all play a significant role in determining how a portfolio is valued and how a transaction is structured.

This episode builds on the foundation from Episode 1 and sets up the next stage of the process. In Episode 3, we discuss who buys debt and how debt sale transactions are typically structured, including spot sales, forward flow arrangements, and how risk allocation and pricing are negotiated in those structures.