States can now cap rates on their own banks—but not out-of-state lenders
H.R. 7866 — American Lending Fairness Act of 2026 · Filed by Warren Davidson (R-OH) · 5 cosponsors · Introduced Mar 9, 2026 · Referred to committee
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What it does
This bill allows individual states to opt out of federal interest-rate preemption rules, but ONLY for loans made by banks and credit unions chartered within that state. It repeals the existing federal opt-out mechanism (Section 525 of the 1980 Deregulation Act) and replaces it with a narrower one: a state can now block federal rate caps on its own-chartered lenders, but cannot extend that block to out-of-state lenders operating within its borders. The effect is to restore state authority over in-state lending while preserving federal preemption for interstate lenders.
Why we flagged it
The bill's operative mechanism is a repeal-and-replace of federal preemption opt-out rules, narrowing the scope to state-chartered lenders only. This is fundamentally a federalism adjustment that shifts regulatory authority from federal to state level, but only for a subset of lenders.
What the text implies
- States that opt out will create a two-tier lending market: state-chartered lenders subject to state rate caps, out-of-state lenders subject to federal preemption. This may incentivize borrowers to seek out-of-state lenders to avoid state caps, potentially undermining state consumer protections.
- The bill's language requires states to adopt a law or voter certification 'explicitly and by its terms' stating they do not want federal preemption to apply. This high bar may prevent states from opting out via general consumer-protection statutes, limiting practical state authority.
The full analysis lists 4 implications of this text.
Who stands to gain
out-of-state banks and credit unions (retain federal preemption in all states); federally-chartered depository institutions (unaffected by state opt-outs)