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Oregon Banned 200% Interest Rates. Lenders Sued to Bring Them Back.

Resist Now 3 min read
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Oregon’s 36% Interest Rate Cap Is Now Under Federal Challenge

Three lending industry groups are suing Oregon in federal court to block a state law that prevents out-of-state lenders from charging interest rates above 36%. The lawsuit, filed in the U.S. District Court for the District of Oregon, targets House Bill 4116, which Oregon Democrats passed in the 2026 session as a central affordability measure.

The plaintiffs are the National Association of Industrial Bankers, the American Financial Services Association, and the Online Lenders Alliance. They argue Oregon is violating the Commerce Clause and the Supremacy Clause by attempting to regulate the interest rates of banks chartered outside the state.

A 1980 Federal Law Let Out-of-State Lenders Bypass Oregon’s Cap

The loophole comes from the Depository Institutions Deregulation and Monetary Control Act of 1980, which allows state-chartered banks to export their home state’s interest rates to borrowers in other states. At least five lenders, most of them based in Utah, used that law to charge Oregonians rates ranging from 73% to over 200%.

31,000+ loans totaling at least $61 million were issued to Oregonians above the 36% cap since 2020, according to the Oregon Division of Financial Regulation.

Most of those loans are short-term and average $3,000, according to Rep. Nathan Sosa (D-Hillsboro), the bill’s sponsor. HB 4116 opts Oregon out of the 1980 federal law for loans of $50,000 or less, cutting off that workaround.

A Similar Colorado Law Was Challenged First

Oregon is not the first state to try this approach. Colorado passed a comparable opt-out law in 2023, and some of the same industry groups sued under a nearly identical legal theory. A federal district court blocked Colorado’s law.

The Colorado case gives lenders a template, and the outcome in Oregon may depend on how Judge Ann L. Aiken reads the federal statute’s limits on state authority.

Briefs from both sides are due by September. Judge Aiken has not yet scheduled a hearing. A ruling blocking Oregon’s law could come this fall, before the law has been in force for a year.

Sosa said the lawsuit did not surprise him, and he remains optimistic Oregon’s law will survive. The state’s argument is that any loan involving a borrower located in Oregon is subject to Oregon’s rules, regardless of where the lender is chartered.

What You Can Do Now

  1. Call Rep. Nathan Sosa’s office at (503) 986-1430 and ask his office to publish updates on the litigation timeline. Constituents asking for transparency create a public record that the law has political backing.

  2. Contact Oregon Attorney General Dan Rayfield at (503) 378-4400 and ask his office to vigorously defend HB 4116 in court. The AG’s office is handling the state’s defense, and public pressure matters before briefs are filed in September.

  3. File a complaint with the Oregon Division of Financial Regulation if you or someone you know received a loan above 36% from an out-of-state lender. Documented consumer harm strengthens the state’s legal argument. File at dfr.oregon.gov.

  4. Tell your Oregon state legislators you want the state to defend HB 4116 and consider statutory backup plans if the federal challenge succeeds. Find your legislator at oregonlegislature.gov/FindYourLegislator.

Sources

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