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DIDMCA Opt-out Complications

DIDMCA Opt-out Complications

The AFSA SGA team published their June white paper examining the Depository Institution Deregulation and Monetary Control Act (DIDMCA).

The paper examines recent opt-out efforts and the potential complications that would arise from states opting out of interest rate exportation, which could impact the banking industry.

It also explains why opting out may not achieve the goals of those pushing for changes.

Enacted in 1980, the DIDMCA preempts state usury laws by allowing FDIC-insured state-chartered banks to contract for the interest rate permitted by the state in which the bank is located and export that interest rate into other states.

Congress passed DIDMCA a little over one year following the Supreme Court’s decision in Marquette v. First of Omaha Service Corp., which established that the National Bank Act allows national banks to export interest rates across state lines, with the intent of leveling the playing field between state and national banks.

To assuage states-rights concerns, DIDMCA allows states to opt out of the interest rate exportation, and seven states initially opted out following its passage. Since then, six of those states opted back in and only Iowa remains opted out. With a recent focus on bank partnership lending, consumer activists and some policymakers have renewed the push for states to opt out of DIDMCA.

This paper, along with SGA’s other white papers, can be found on the SGA resources section of AFSA’s website.

June 2nd, 2023 by

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