Webinars
Financial Services

"The Existential Threat to 45 Years of Interstate Banking," Davis Wright Tremaine Webinar

10.05.26
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For more than 45 years, the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) has allowed state-chartered banks to lend across state lines under consistent federal rules, promoting competition, consumer choice, and access to responsible credit. Recent actions by Colorado and Oregon threaten to undermine the interstate banking system and access to responsible credit for consumers nationwide. A broad coalition including federal regulators, state attorneys general, banks, and consumer lenders has supported legal efforts to challenge Colorado and Oregon restrictions on interstate banking. In August, the U.S. Court of Appeals for the Tenth Circuit held an en banc hearing in National Association of Industrial Bankers; American Financial Services Association; American Fintech Council v. Weiser, et al. And in September, the House Financial Services Committee advanced the American Lending Fairness Act (ALFA) of 2026, reaffirming the scope of DIDMCA's protection of interstate lending, on a bipartisan vote of 31-18.

Hear from a distinguished panel, including Rep. Warren Davidson (OH), sponsor of the ALFA, and David Gossett, lead litigator who argued before the en banc panel, about the extraordinary stakes of this dispute for American consumers and its potential to undermine the dual banking system.

Speakers:

Webinar Transcript

The following transcript was created using AI-assisted speech recognition and formatted for publication. Readers should be aware that automated transcription may not capture every statement with complete accuracy.

Michael Galeano: Good morning, folks. Since participants are kicking in one by one, we're going to wait a couple minutes here. Allow some people to join. Okay, it's 2 minutes after, so… Welcome, everybody, thanks for joining. My name is Mike Galeano, I'm with Bread Financial. We are the issuer of your 100 favorite credit cards. So a variety of channels and platforms, but I won't do more of the promo. Thank you, Daniela from DWT for the logistics on this, and bringing everybody together. And I'm going to introduce speakers, sort of, as they come up. And one theme that will be consistent is They were willing to get in when others were not before this was so popular. That all these people would attend a webinar. And we're starting with Representative Warren Davidson, proud to say, one of Ohio's, where I am as well. And I can tell you that I had coffee with him, in February of… 2025? 15 minutes, 20 minutes, when it was over, he said. I'll do it. I'll put my name on that. And he did. And he made it a priority with his staff, and they were wonderful. But as everybody knows who's ever dealt with people in any legislature, probably Congress more than many. They agree with a lot of what you say, but they don't necessarily put that into action. And he did not hesitate, so… That is notable and greatly appreciated. So Congressman Warren Davidson from Ohio, welcome.

Warren Davidson: Thanks, Mike, and thanks everyone for joining this call and allowing me the opportunity to join you. You know, Mike came to me with a problem, and one of my favorite things in the world to do is try to solve problems. Some of them are pretty complicated. This one seemed pretty straightforward. I mean. You know, it's been common sense language for a long time. The whole point of DMICA was to make sure that state chartered banks could compete across the nation. And, you know, that's part of the point of the Interstate Commerce Clause, that you can be in one state and sell across state lines, and you're regulated by your state, but not necessarily all 50. And so that's been great for our, financial systems, it's been great for a lot of sectors of commerce. Oh. And… the law was very clear since 1980, and then Colorado had this innovative idea that instead of regulating their own citizens or the banks in their state, they could relate anyone who does business with their citizens, which really undermines the spirit of, of Didn't Mika, and frankly, the whole regulatory framework for banking and a number of other sectors. So, immediately there were court challenges, but the Constitution is supposed to be defended by all the branches, and Mike came to me with, surely there's something we can do about this. I said, yeah, that seems like an easy enough fix. Let me see what we can do. And we started working on texts. You know, on the back end, you know, my staff started working with some of the other folks that will speak today, and they'll share that story. But we kept simplifying it, we got a basic set of language, and look. Democrats didn't accidentally come up with this innovation in Colorado, and then Oregon, and then a couple other states, so there's maybe a more progressive wing. of the party that really pushed this. So, as I started circulating it with Democrats initially, they would say, oh yeah, that seems like an easy fix. And then they're like, well, I don't know, I don't really want to go against Colorado. Well, I don't know. And then committee staff became kind of the barrier, financial services committee staff. So he started working on it and building relationships. And on the outside of this, you know, Mike and others, but especially Mike, really worked this hard. So why take meetings with your member of Congress or representative at any level? Because it drives the agenda. And, you know, Mike personally came, so did other people in the industry, to weigh in on this. And so, when I would talk to a colleague, I would find, oh yeah, they're working on that. When I would talk to someone in the Senate, Senate Banking. Oh, yeah, we're talking about that. And so this helped people pay attention to the issue, and it was really essential for me able to get traction on this as fast as we were able to. And you know, fast is relative, but in congressional terms, this is relatively quick. So, we were able to get the bill marked up, just last month in financial services, so that's… The first process for a bill is, well, get it drafted, get the sponsor and co-sponsors, and then you notice it for a hearing, so you can talk about it. That's been done. And then we were like, okay, but we need to vote on it in committee. And last month we did 3118. So bipartisan passage, and that'll certainly help his chances. So what happens now? Normally it would be scheduled for a floor vote in the House and you would try to get a similar action in the Senate. The Senate has very different processes. In general, getting standalone votes on legislation is really challenging in the Senate, and hopefully they'll work on their own Senate rules right after this election and make it simpler and more effective in a lot of ways. But nevertheless, the most likely path at this point, due to the timing in this Congress. and the challenges between House and Senate processes is that we attach a number of financial services, Senate banking bills into something that has to pass, like the Defense Authorization Act. Or the continuing resolution, or maybe an omnibus that will happen at the end of the year. Those are three things that almost certainly have a way to pass by January 3rd, because once January 3rd comes, no matter who controls Congress, Republicans or Democrats, after this election. The term resets, so every legislation has to be reintroduced, so you kind of have this shot clock that creates pressure. And in general, that's the way that things move through the legislature, but particularly so in the Senate, you know, pressure and deadlines. And so, thanks to Mike and everybody for helping create the pressure to get action so far, and the calendar's gonna take care of the deadline. But I think that's the most likely path here, is that, having passed financial services. it'll get attached to something else. And maybe to help build momentum, we might put either this bill or several as stand-alone votes on the House and show for sure that they're bipartisan, and that makes it harder for Democrats to object when you're negotiating these, what they call, four corners deals, where the two-corner top Republican, top Democrat in the House, top Republican, top Democrat in the Senate, are the four corners that negotiate, and usually there's some compromise, things that one party wouldn't love, but they're not totally opposed to. So showing it's bipartisan helps build those kind of deal-makings that happen in the really big must-pass bill. So that's the most likely path, given the calendar, and it's been an honor to work on that and a lot of other issues. So again, Warren Davidson from Ohio, I'm chairman right now for National Security and Illicit Finance. And been part of financial services for 10 years now. Thanks a lot.

Michael Galeano: Thank you, Congressman. I know we might lose you at any time here, so I just want to make sure we all. Recognize your contribution, and thank you for your time. The next person up. is David Gossett. David is a partner with the national, if not international, law firm of Davis Fright Tremaine. Be sure to tell James Mann I said that. And, It's a little bit interesting here, because, When we were looking to put a lawsuit together. I talked to several firms, and One firm, I said, just give me two pages on why we ought to win. And then, of course, I got 6 pages that didn't really even like. And then I gave David's firm, whom we work with a great deal, and they've been a great firm for us on many things, I said, give me two pages on why I lose. And I can still remember being on the cell phone in my living room, and I I'd read his argument about why we're gonna lose, and I said. I'm worried we're gonna lose. And I started talking to him, and I said, okay, but setting aside what I asked you to do. What's the right answer? He goes, oh, no, you should win. This is me. He goes, I'm not saying you'll win because it's a slam. I'm saying, on the merits, you absolutely should win. This is right. And I came back to him with a question, and I said, well, here's what I don't… okay, let me challenge that. The big argument here is. if you're opting out, doesn't that mean that you go back to the status quo of 1980, and you can do whatever you want if you're the state? You can control everything, because that's how it was? And he said. Well, status quo has changed, Mike. 49 other states got the benefit of this, and they didn't opt out of anything. And that's just how it is, I thought. How would you like to take on this case on the pro side? And that was a good decision on my part, and I never looked back. So, David then has another role. David was the civilian drafter of the bill. That after iterations and input from the Congressional Office in the House and Senate, became what we now affectionately call Alpha. And I'm going to stop there and turn it over to David.

David Gossett: Sure, okay, I'm gonna walk through, the litigation in Colorado, how we got here, then I'm gonna turn over to. Frank, Phil, and Danielle, who represent the actual plaintiffs in the Colorado case, to talk more about the, the impact, the coalition, etc. I'll just give people a rundown of where we are and why we're there. So. procedural posture. We we as as Mike said, I talked to Mike. We talked to various trade associations. We convinced NAIB, AFC, and AFSA. I'm looking across my screen, and that's the order they're… they are on my screen, which is why I said them in that order, to, that this was a problematic law and problematic. unlawful, as Colorado is interpreting it, and deeply problematic for industry, so we brought a lawsuit. We filed suit in March of 2024. and sought a preliminary injunction to enjoin Colorado from enforcing its DIDMICA opt -out as it had seen, it interpreted it. We were assigned to Chief Judge Dan Domenico in Denver, who held a preliminary injunction hearing in May of 2024, and then two weeks before the law was supposed to take effect, enjoined the law. and said it would not take effect while the litigation continued, but basically said we won. Colorado appealed that case to the 10th Circuit. A divided panel… so initially, cases on the appellate court are heard by a three-judge panel. A divided panel reversed in November 2025. Two judges. ruled that Colorado was right in its interpretation, one disagreed. We sought rehearing en banc, we sought, sort of, the full, 12-court, 10th Circuit to hear the case, and We got significant amicus support in doing so, which, others are going to talk more about that coalition, but the bottom line is we got not only a lot of the. sort of banking industry involved and states involved, but two different federal banking agencies, the FDIC and the OCC, both said, Court of Appeals, you got this wrong, and you need to rehear this case en banc. The court agreed to do that, and we… and there was oral argument on the en banc appeal on August 18th, so now we're awaiting a decision. The practical point I should say at this point is that the injunction has stayed in place throughout the litigation so far, so Colorado has never been able to enforce its opt-out against out-of-state banks. So Let's talk briefly about the merits, then. What the Judge Domenico said, what the panel has said. Judge Domenico ruled in our favor on the ground that, where a loan is made, which is what Didmica says, focuses on the act of making a loan, and in plain usage. Lenders make loans. Borrowers don't make loans. So a loan is made where the bank is located and does its lending, not where the borrower happens to be. The panel majority disagreed. It read made as, as it put it, a participial adjective, and loans made is an executed loan, which needs two parties. Under its reading, therefore, a loan is made in Colorado if either the lender or the borrower is in Colorado. In doing this, the court applied a presumption against preemption, saying we should not… we should presume that Congress didn't intend to preempt state law, even though, of course, what they're doing in this instance is essentially preempting the choices of other states. to not opt out, and targeting loans by banks in the other 49 states that those states think should be. sort of allowed to lend across the country. There was a dissent. Judge Rossman dissented from that panel. She said that grammar doesn't decide the case. She poo-pooed this participial adjective analysis of the majority and said that the various sections of the statute should be read together, specifically sections 521 and 525, and a loan is made in the same place under both. She also pointed out that the majority's reading produces disuniformity that Congress never intended. Disuniformity was her word. So… had oral argument a little over a month ago, and that's where we are now. Reading the tea leaves of the argument, which is, of course, I think what people mostly want to hear from me, I will hedge up front and say it is always hard to know what's going to happen based on an oral argument. Judges ask questions to push the limits of their arguments, judges ask questions to tweak the other side, to tweak the other judges, etc. So, it's hard to know. Here, though, the signs were encouraging. First, that the court is going to reverse the panel, agree with Judge Domenico, and agree that the law is. preempted as applied to out-of-state banks. For starters, granting en banc review is itself a meaningful signal. The Tenth Circuit grants en banc review almost never, literally less than 1% of cases. So, usually if they're granting review, it's to reverse. Not always, but that's where we start. We knew going into the argument that the original panel was split 2 to 1 against us, so we knew there were 2 votes against us, at least, out of the 11 judges who heard the case. There are 12 judges on the 10th Circuit, but one judge was recused for… we don't know exactly what reason. Coming out of the argument, our sense was that more of the court was receptive to our reading than not. That said, several of the judges asked no questions whatsoever. So it's we really can't necessarily predict the outcome. Encouraging signs from my perspective were that the judges pressed Colorado on whether banks would have to find out where each borrower was when signing because, of course, a Colorado resident could be traveling and could be in California when they're actually taking out a loan. And this would, under Colorado's interpretation, that would still be a loan that was governed by the the state. Banks, on the other hand, would have no way of knowing. Colorado's answer was essentially ask the borrower, which is obviously not possible. The judges also probe this, the question of whether a loan is made to the same place where it's executed, which was a point we had made. And… some judges also raised, Congress's constitutional concerns back in the 70s for why they included this opt-out, which, would suggest that it was all about protecting states' rights over their own banks, which is basically what. our point was. And so there was basically some buy-in from the podium to our, framing, which is that the only question the court needs to decide is whether the borrower's location matters, and, many of the judges seem to think so. At the same time, there were a couple of judges who asked harder questions for us. They… several judges asked whether our reading makes the opt-out essentially meaningless. We said, no, it doesn't. Colorado can still regulate its own state banks wherever they're lending, but that, is… not what Colorado wants to be doing, clearly. So, it's meaningless in the sense that Colorado doesn't want to do that, but that is what we think they're allowed to do. There also was an argument… a question at the very end of the argument about rent-to-bank arrangements, which is Colorado's main policy concern here. That said, I don't think that the… the state's answer suggested, that there was much worry there. Anyway, I'm going to close and turn this over to others where I closed on the oral argument on parity, which is The most important thing to remember is that whatever happens here, national banks will be able to keep lending in Colorado above Colorado's rate caps. So the only question is whether state chartered banks can do so, too. even on Colorado's view, therefore, of what's good for its residents, this case really isn't about consumer protection. It's about whether one state gets to put another state's banks at a competitive disadvantage. And that… that does not seem smart, it does not seem sensible, and it's why we had such a broad coalition of people opposed to us. Yeah. So James D. With that, I think we're gonna… I'm gonna turn it over to Frank to talk more about the impact and the coalition, that was behind us here. So, Frank, it's all you.

Michael Galeano: No, it's not. It's me to introduce Frank.

David Gossett: Okay, sorry!

Michael Galeano: is due props. Keeping with the theme of, Being there in the beginning. I called Frank, and I was explaining to him, you know, we need to have a lawsuit to bring this to a head, et cetera, et cetera, and he made it very clear, Mike. You don't have to ask me twice. We will gladly sign on to an amicus brief. As a friend of the court. showing our support for this case. And I said, you know, I appreciate that. But I think we're going to need an upgrade to Plaintiff. And he said, well, let me… let me talk to the board. But I think we can do that. So, I was invited, to speak to the board. They were very receptive. Frank had clearly informed them of the merits of legal issues and the importance. And as far as I know, it was unanimous. But if we only squeaked by, I'll still take it. So, Frank, I always, remember that, thank you for that, and he's been in there every time since, and the NAIB is also plaintiff in the lawsuit against Oregon. So with that, Frank, fire away. I think you're on mute.

Frank Pignanalli: Sorry about that. Thanks, Michael. Thanks to Davis Wright-Germain for I know this was sponsored seminar, and I want to express thanks to Congressman Davidson. Yes, we're involved because this is an existential issue for all state chartered banks, including industrial banks, because we are state chartered banks. And this is about whether consumers continue to benefit from a competitive market for credit, or whether it's replaced with 50 different sets of rules. For more than 45 years, DMICC has allowed state chartered banks to lend across state lines under consistent federal rules, just as national banks do. And that gives consumers more choices, more competition, and broader access to responsible credit. Colorado and Oregon threatened to turn that system on its head by imposing their own restrictions on loans. made by banks chartered and regulated in other states. And the great irony is that laws intended to protect consumers are going to end up hurting those very consumers they're supposed to protect, because limiting how credit can be priced doesn't make it cheaper, it just makes it less available. This will also impact smaller banks, because you're adding all these different regulatory burdens now. The thing that is incredible is the unprecedented coalition that's behind our efforts. That includes briefs filed by the FDIC, the OCC, the Conference of State Banking Supervisors. 21 attorneys general, 52 state banking associations, America's credit unions, the military credit unions, the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, American Financial Services Association, the National Bankers Minority Depository Institutions, the U.S. Chamber of Commerce. various consumer lenders, Fintech companies, and academics. That's an amazing coalition. Large and small banks, credit unions and community banks, and traditional services and fintechs. And they all agree that allowing individual states to reach across their borders and impose their rules on banks chartered on the states threatens Interstate Banking Framework and the competitive nature of our dual banking system. So I want to close where I started. This extraordinary consensus tells you that this is an existential threat, and so we're grateful to the wonderful work that Davis Rachel Mind is doing. We appreciate Michael's leadership. And also Congressman Davidson and Senator Marino for what they're doing too, because this will protect what the system that we've had since the founding of the Republic. Thank you.

Michael Galeano: Okay, thank you, Frank. Next up. is Danielle Arlowe. The backstory on this is. I'd never interacted with the AFSA before, and I didn't know Danielle And so I prepared some notes from my conversation with her. But you need to explain what Dimica is. See if she'll join the lawsuit. And, and after that, you're gonna have to get care enough to, you know, really jump in. That was a waste of time, preparing those notes, because she knew more about Nimica than I did. They were ready to rock and roll and get involved in the lawsuit. And in… I mean, she's been in front of, state hearings, trying to prevent other states from doing DIMICA, and her colleagues have been in D.C, working both sides of the aisle on the legislation. So, suffice to say. This is one time that my ignorance paid off because it was all better than I thought it was going to be. So Danielle Thank you again, and the floor is yours.

Danielle Arlowe: Thanks so much, Michael, and I thanks for letting me use this picture since my hair looks better there and I have more makeup on there. I want to thank David and Davis Wright Tremaine, of course, Congressman Davidson, Michael, of course, Frank NAIB, and Phil and AFC. Phil, who I get to see out and about in the States testifying as well. And Frank, who if you meet anybody from Utah, he's like my You just say Frank and people know what you're talking about. One word is only the only one name only. So as has been discussed, DIDMACA passed in 1980. passed by Congress after the Marquette decision, saying that state charter banks can export rates, just like national banks, but unlike national banks, states can opt out of exportation. Here's a history of opting in and opting out. Here's more of a timeline. So within 3 years. Seven states opted out of DIBMCA, Iowa, Colorado, Maine, Massachusetts, Wisconsin, Nebraska, North Carolina. These are states, I'm not saying that we, Puerto Rico's in there too, we don't… We think Puerto Rico is great, we just are only talking about states in our materials. And then starting just 3 years later, in 1983 and through 1995, every single state Except Iowa, reversed course and opted back into DIDMICA. And so we asked why. Were they, you know, were they protecting their state's consumers too much? Or did it turn out that opting out of DIDMICA didn't do what they thought it would, and hurt their own state's banks more than it helped any consumers. It remains that Iowa's the only state that stayed opted out, but it turns out that Iowa has deregulated rates for things like credit cards, and so it never came up. And actually, when Colorado opted back out in 2000… 23, they became the first state to opt out, opt back in, and then opt out again of DIDMACA. As Congressman David stated, the modern phenomenon is different. In a 2021 blog post, an Iowa professor wrote that He had the panacea to the rent-a-bank problem to turn the tables on companies using the so-called rent-a-bank model by states opting out of the 1980 DIMACA law. So, cue the unicorns from our perspective. This is what the professor believes is the magic bullet. And again, as mentioned, that Colorado became the first state to opt back out again, and Iowa was the only state opted out. This is sort of the rainbow of historic state activity, because we don't have stripes, it's incomplete. Colorado is enjoined in red, but it would be striped in yellow, since it also opted out and opted back in. The recent legislation is a little bit cleaner, and this lets you know kind of where we are in terms of legislation that's been introduced, with only Colorado, whose law is enjoined. As David mentioned and explained, and then only Oregon, enacted, and recent legislation as recently as this year in. in various states and in New York. So when… when Colorado passed, as Michael outlined, when Colorado passed this law in 2023, we tried to dig in as to what was going on, and you might wonder why we care. You know. We AFS is a little bit different than some of our peers. We have a number of state chart… we have people who charter with… who partner with state charter banks as well. We have some state charter banks who partner, but basically, we've got a lot of members, and they vastly outnumber the others, who just organized after 1980 as state charter banks because it was a viable, a viable solution, a viable business model, and it was on a level playing ground with national banks. They chose a state charter to be, to have predictable predictable markets and consistency around the country. And we did the state legislative history project. We started in 2023. It took us about a year. We listened to you know, tape after tape after tape in Colorado, which is how their state legislative history worked. We dug into, you know, microfiche in other states, etc, to try and figure out what the reason was for opting out and opting back in, and though it's not monolithic, generally speaking, the states, the seven states that opted out right after DIDMACO was enacted did so because they They, you know, it was a federalism kind of thing. They said, you know, we don't want DC telling us what to do. And generally, they opted back in because they found that they weren't as competitive, they weren't being seen as states that banks might want to charter in, especially in the growing credit card space at that time. So that's what we found, and that is all. Thanks again so much for this opportunity to talk to you guys. I'll stop. Sharing now.

Michael Galeano: Thank you, Danielle. One thing that I learned from reading AFSA's history of DIMACA. was Colorado, when they were opting back in in 1994, one of their key legislators was asked about that decision. And he said, well, it's not like we can tell other banks from other states what they can do, so we're not doing… we're not accomplishing anything, we might as well just hop back in. Nobody quoted him in 2023 when they were bull rushing this through the legislature, so… but that was important. We all know the phrase, last but not least, it's very applicable here. I am very pleased to introduce, although a lot of you probably already know him, or know of him. Phil Goldfeder is the head of the American Fintech Council, and he is a veteran of the legislative process from various perspectives, sides of the desk. And, he has been energetic, to say the least, since day one, and it's very much appreciated. Sometimes this stuff can get heavy and boring, and… Phil makes sure it's neither one of those. So, with that introduction, Phil, please, go ahead.

Phil Goldfeder: Thank you, Mike. I spent a long career on the political side of these conversations, and have been really privileged to work with people who have been doing this on this side for longer than I have, dealing with Frank and working with Frank at the NIB on some of these issues, and as Danielle noted. we have traveled state to state to state to state together, testifying, meeting with members of the legislature, trying to head off a lot of these things long before they become David's problem, and DWT's problem. But I will say. if you ever get to that point, DWT is is the right place to go and they have proven it time and time again. And and obviously I think the the coalition is nowhere without Mike and the team at Bread who who really have been sort of leading this charge. And so, to that end, I think, you know, generally what we see when it comes to state activity is that when there is complex litigation going on. Especially when the courts are ruling in favor, you tend to see other states kind of have a wait-and-see approach, right? You know, states don't want to get into litigation just for the sake of doing it, and usually when there's litigation going on, and we've seen this previously, as a matter of fact, in Colorado over a similar case, valid when made, we found other states waited to see what happened before they take additional work. Unfortunately, we saw legislation pop up in Oregon, popped Oregon, and I, again, Danielle and I were in the room where we're members of the legislature, we're talking about Dignica. with the idea of protecting consumers in one sentence, but on the other side, you know, in the very next sentence, saying that 98% of consumers across Oregon were unimpacted and were doing just fine, following within the state's usury caps. And so. I think Oregon, by its own admission, had said that there was not really a Fintech lending or an abusive lending problem. And yet still made a determination to step in and pass that law. And quite frankly, I've been very proud to, again, work with Frank and Danielle and others to bring a lawsuit in Oregon similar to the one in Colorado. you know, again, to make it very clear that it's ultimately the consumers who are going to be harmed. That is really what is happening, and you know, regardless of what anybody tells you, you know, we oftentimes think about sending, you know, legislating for the sake of sending a message or making a point. In this instance, in Colorado, in Oregon. it's not just about making a point, it's actually going to do more harm for consumers, because it inserts more uncertainty into the market, and quite frankly, confuses consumers more than it protects. And once again, just in the last couple of months, we've seen a bill introduced in New York. Now, again. We're out of legislative session at the moment, and so that bill is going to be… have to be… is going to need to be reintroduced when legislative session starts again, as you heard from Congressman. Davidson, the term ends at the end of this year, and so, again, I think it's more of a message for message sake. And when we're sending messages, we have to really think about what the purpose of that message is, and who it's going to harm most. And quite frankly, as a former member of a state legislature myself, you're elected to find ways to protect your consumers and protect your constituents. And what we're doing and what we're seeing now proliferate across the country is reactionary legislating for the purpose of sending messages. And quite frankly, huge credit to David and his team. You know, ultimately, this is going to not impact nationally chartered banks. It is only going to have an impact on the smallest percentage of banks, and quite frankly, those very banks are starting to think about their business model, and how to… make sure that they can compete with national banks. And so, moving this issue forward, whether it's legislatively, getting additional legal wins is going to help provide the clarity to ensure that consumers get the access to their fair, responsible credit. And again, I wouldn't be here without our colleagues, and everybody is part of this coalition, so really, thank you again.

Michael Galeano: Thank you, Phil. I think we have some questions, so… David, I think you saw that first question that popped up in today's chat about high interest rates and how all this plays out. You want to address that?

David Gossett: Sure, I should also say, happy to have more questions. If people have questions, they should type them into the chat, into the Q&A in the Zoom. Also, I just wanted to flag, because I don't think Danielle said this directly, but the AFSA did make a legislative history material is freely available on the web. They've made that publicly available, and I just checked, if you search for AFSA DIBMICA legislative history, you'll get a direct link. I'm sure you can find it other ways too. But anyway, the only question we have so far is someone asking, what should states do about high interest rates, which is what they're obviously trying to address here. And I have a couple of points to say about that. The first is, and this ties into what Phil just said, is that the DIBMICA opt -out won't that. National banks can continue to lend at whatever interest rates are allowed in their home states, whatever happens here. So really, what this opt-out does is just change the balance between national state banks. And there is clear evidence, and this is also part of the reason why the OCC filed an amicus proof in this case, that some state banks are considering converting to national charters precisely because of the opt -out issue. So that won't solve it. To the extent that people think the interest rate that some banks are charging are too high. That's something that Congress can fix nationally, or Congress can, by sort of legislating, or states can change their, the interest rates in their home states. So, also, the premise of the question is a bit wrong. It is the case that in the, the 4 years before. Colorado opt-out of DIDMICA, they were concerned about a couple of situations where entities were charging what they thought to be overly high interest rates to Colorado consumers, and they brought enforcement actions against them and succeeded. It was using existing authorities. They didn't need to opt out to, in fact, have those situations stopped. So I I don't… I think the question was not necessarily looking for a serious answer, but that's the serious answer to the question. Are there any other questions from people in the audience? We'd love to hear them if there are.

Michael Galeano: And, oh, so please go ahead.

Frank Pignanalli: Oh, I'm just gonna David made a great response. And I just want to add. to that is that a vast majority of the small business loans and consumer loans that are made to Americans are from state-chartered banks. And when you're threatening the system, as this does, the opting out. That means state-chartered banks are going to have to do different things, becoming either national banks or merging, or things like that. And it's really contrary to what we've had. Literally, state-chartered banks have been around since the founding of the Republic. And now you're making their existence threatened because of not only they can't compete against the national banks, but also you're adding regulatory burdens, too. So this really just really goes to the heart of the dual banking system. And it might be easy for some to say, well, you know, we want to do this or that, but consumers rely upon state chartered banks for the most part, for their average living expenses, and also for small business loans. That's what… that requires a close examination of where we are as a country, and that where… the reason why we are where we are, because of the relationship between American consumers, small businesses, and state chartered banks.

Michael Galeano: If I may, just… add in a little bit to the two comments you guys made. One is… When we're talking to congressional members about this, one of their first responses is, well, you know. affordability, high interest rates, people need a break, you want to protect consumers, and all legitimate concerns. As one congresswoman said to me, who's not for lower interest rates? And I get it. But… Common sense, and common economic sense, and in fact, empirical data show. That the people who end up affected the most, when you introduce artificial barriers. as I'll refer to as the people lower on the FICO score. Because if a bank is now told you can only charge this much interest. And every loan is an assessment of risk. Then, you've just decreased the population of people to whom They're willing to loan. And that means the people who are most in need of accessing credit. Are the first ones to get hit and there's studies on this which we can. Make available somewhere, somehow. But, and I had a conversation, With, one of the congressional members, and what I really appreciated, and was the Democrat who voted in committee for the bill. And it was a staffer who said. You know, once they heard you guys were doing this, all the consumer groups were coming and calling and telling us, this is horrible for, you know, people at the bottom, et cetera, et cetera, and… The staffer said that to them. Send me the data. And he never got it. And I sent him our data, and he did get it. That congressman voted for us, which I appreciated. A last note, just on the sort of How this… came down, at the hearing, and I realize that these hearings, people are going to make their introductory comments. From the right, they're going to say whatever they're going to say, life is great, this is a good idea. And some on the left would say, well, you know, we live in a Age of unaffordability, and two of the congressional members said, you know, people are using credit cards just to pay for the basic necessities. And then they voted against. They voted against the bill, which would have ensured they still had access to credit cards. So, anyway, that was my take on that. So I think there was another question that Danielle was going to field, so I'll let her do that.

Danielle Arlowe: Sure, thanks so much. Someone put this in the chat. It's such a good question. It's what impact would a 10th Circuit decision upholding Colorado's law have on consumers and the banking industry as a whole? So I'll just start. I mean, this is such a great question because it's ironic. Ironically, consumers would still have a choice of all of these products, right? Because people who Colorado legislators are complaining are partnering with state charter banks could, if that channel were turned off, could still partner with national banks, they could partner with sovereign tribes, and so It's not going to, it wouldn't accomplish the one thing that Colorado is trying to accomplish, but what it does is create this collateral damage for members like ours who are state charters who are just trying to operate on an even playing field around the country, and Colorado doesn't have any problem with their, with their rates, but they need that consistency and predictability in order to in order to operate. However, it would cut off, you know, it would certainly cut off some kinds of credit, to Coloradoans, but the worst things. That they're trying to stop? The so-called worst things would not be stopped. That is the irony.

David Gossett: I also just wanted to add one clarifying point on this question, which was the question that Danielle was answering, what impact would a decision upholding Colorado law have? And that's actually not quite the right terminology. Colorado has the right to opt out. There's no question that states have the right to opt out. The question is just, what does it mean? And our view, and we think the correct legal view, is that what What that means is that Colorado can regulate the interest rates charged by Colorado chartered banks. And that's how the law historically has been interpreted, and that's our view. That they may not want to do that is a separate question, but they can opt out. It's just what does it mean? Anyway, there's another question that I think Bill was going to take the next one.

Phil Goldfeder: Yeah, no, and I was… first, to answer one question, I mean, you don't have to look very far across the news to see that there are so many, number one, Fintech lenders, or historic Fintech lenders, who are now opting for an OCC charter, and have submitted applications for OCC charters, as well as Fintech lenders who have moved to purchase nationally chartered banks. And I don't think we've seen the end of that, and so the question, that was asked about, you know, are there those we're considering? In addition to what we've already seen, I can tell you that I know of many, many more that are exploring those options, and… inevitably are going to go that route just to avoid this, sort of, this challenge. But ultimately, to pile on to what Danielle and David have said, is it's going to fundamentally reduce access to credit. And I think that's the challenge, and I think, Mike, you pointed this out as well. the idea of lowering usury caps does not mean less expensive credit. It means less credit, because we're talking ultimately about risk. And that's what it comes down to. And someone asked a question about, is it just about usury rates, right? It's really not. It's about… it's about impact to To con to for consumers and to consumer lenders who are trying to offer. reasonable access to credit. And so, in Colorado, there's sort of a floating interest usury rate cap. In Oregon, there's a 36% interest rate cap, but ultimately. It doesn't really matter. It's going to impact users' access to responsible credit, and quite frankly, this is a bad tool to use. As I mentioned earlier. Oregon, sort of by their own admission, said that 98% of lenders were in full compliance, and yet still decided and determined to use this blunt tool to somehow solve a problem, I think, by their own admission, doesn't really exist. So, the implications here are far, far wider and worse than the actual problem we're trying to solve for.

Michael Galeano: I… I…

David Gossett: Throw in one thing on that, Mike.

Michael Galeano: Go ahead, David.

David Gossett: Sure, I mean, this question of banks changing charters that Phil's addressing, the one other thing I want to flag is that, it's important to remember that while these two states have tried to change, both are subject to legal challenge right now, neither has taken effect. There is the bill that Representative Davidson was discussing, so I think The… the risk is huge, and that's what… and Phil, unlike me, Phil talks to… to the bankers who are saying we're… we're, in fact. thinking this through and planning it out and figuring out when to do it, but the drove of such transitions will only happen if there is, in fact, bad precedent from a court, or this goes the other way, or for other reasons. But I think the risk is huge, and as Phil said, we're hearing it from actual bankers, so…

Danielle Arlowe: And even the discussion of it… sorry, Michael, even the discussion of it has had a chilling effect, and there are… we have members who are seeking to switch to a national charter, and so the collateral damage. is… is huge.

Michael Galeano: I was, consistent with that, I was going to mention The CSBS, the Conference on State Banking Supervisors, is a nonpartisan organization. These are the supervisors in… one in each state who supervises the bank industry, so they're not some banking industry lackey. They wrote a letter endorsing the legislation. To preserve what we're talking about, which is that the limitations of the opt-out. Now, what's their… what's their point? That's a recognition. that the state charters are threatened, as Frank had said, that go back to the founding of the country, and in fact, they said. We are aware of many state. bank chartered entities looking to move to the federal charter. So. you know, with a lot of us on the line, you could say, well, you've got a vested interest on one side or the other, but that group does not. And with regard to Protecting consumers, et cetera, I would, I would, it's important to note another. organization that signed on to the trades letter supporting legislation was the National Bankers Association, which is comprised of minority depository institutions. The very people Exact consumers that some are claiming are being hurt because of our interpretation. That's… that's the whole marketplace for these banks. And they're recognizing that their consumers, the ones that they service, will be damaged if the Colorado perspective and Oregon perspective, is carried out. And one last note, and then I'll stop talking. One of the points that David made so well in Colorado two years ago was. Once you have individual states interpreting where a loan is made. It's not as if there's going to be a state definition and a federal definition. By the way, the federal definition was a 9-0 decision by the U.S. Supreme Court. I don't know how much more solid you can get. All it took was one more state to opt out before you had a conflict. Oregon's definition of where a loan is made. And I won't bore you with it, but there are fact patterns, very easy ones, in which Oregon would claim that they control the loan. And Colorado would claim that they own the law. So, every time a state steps up, and by the way, the New York definition of where a loan is made differs from both Colorado and Oregon, so… There you have it. That's why you don't have states interpreting federal law. It looks like we went over the assigned 45 minutes, but… pretty much everybody stayed on the line. So, I want to again thank all of our speakers, for taking the time today, and the insight they provided, and for all what they've done all along for the last few years. I also want to call out, upstream, Amanda Deaver and Chris Smith of that organization are here. They have a They've been doing communications, and media attention on this issue for quite a while. This is a culmination. Of their efforts, and those efforts are very much appreciated, even for those who don't have a vested side. They've made sure that information's gotten out and is available to people with regard to legislation and to litigation. So, is there anything else I should do, folks, before I thank all the attendees? Okay, then I'm gonna thank all the attendees.

David Gossett: Thank you, everyone.

Danielle Arlowe: Thank you.

Michael Galeano: Very much so.

Frank Pignanalli: Thank you.

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