A POTENTIAL REVIVAL OF SECTION 525 STATE OPT-OUT FROM FEDERAL PREEMPTION?

Colorado appears to want a second bite at the state opt-out apple. A bill introduced to limit charges on smaller consumer loans includes a provision that would revive Colorado’s explicit rejection of federal usury preemption by way of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”). See Colorado HB 1229 (passed house on third reading without further amendment on April 11; introduced in Senate on April 12; enacting a new Colo. Rev. Stat. § 5-13-106.). Colorado already opted out of federal preemption once before and previously repealed its opt-out. See Colo. Rev. Stat. § 5-13-104; repealed in 1994 by Colo. Sess. Laws ch. 272, § 12 (eff. July 1, 1994). Colorado is one of a number of states that have adopted some version of the Uniform Consumer Credit Code, which can repudiate contractual choice-of-law and venue provisions that do not choose a borrower’s state of residence and often contain broad territorial provisions that can deem transactions with state residents to have been “made” in the adoptive state. Read More