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Financial Services Law Insights and Observations

Colorado limits out-of-state bank charges on consumer credit

State Issues State Legislation Colorado Consumer Lending Interest Rate DIDMCA

State Issues

On June 6, the Colorado governor signed HB 23-1229 (the “Act”) to amend the state’s Uniform Consumer Credit Code (UCCC). Specifically, Colorado has invoked its right under the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) to opt out of a provision that allows state-chartered banks to preempt state interest rates applicable to consumer credit transactions. Sections 521-523 of DIDMCA currently allow state-chartered banks to charge the interest allowed by the state where they are located, regardless of where the borrower is located and regardless of conflicting out-of-state law. Section 525, however, provides states with the authority to opt out of these sections.

Modifications to the UCCC impact requirements for alternative charges for loans not exceeding $1,000, and include the following changes:

  • Reduces the permissible acquisition charge on the original loan or any refinanced loan from 10 to eight percent of the amount financed;
  • Reduces permissible monthly installment account handling charges based on categories of the amount financed;
  • Increases the minimum loan term from 90 days to six months;
  • Removes the ability for a lender to charge a delinquency charge on a loan;
  • Amends provisions relating to the conditions upon which an acquisition charge must be refunded to a consumer; and
  • Limits the number of times a lender can refinance a consumer loan to once a year.

The amendments take effect July 1, 2024, and only apply to consumer credit transactions made after that date.