States can now cap rates on their own banks—but not out-of-state lenders

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.
• Repealing Section 525 eliminates the existing mechanism by which states could opt out of federal preemption entirely. States that previously relied on that mechanism will lose that authority unless they affirmatively adopt new law under the narrower framework.
• Out-of-state lenders will retain federal rate preemption even in states that opt out, potentially creating competitive pressure on state-chartered lenders and incentivizing consolidation or charter conversion to federal charters.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Consumers in states that opt out may face higher rates on loans from state-chartered banks (a cost), but consumers borrowing from out-of-state lenders retain federal rate protections (a benefit). The bill shifts power from federal preemption to state-level control, creating a patchwork: some borrowers gain state-level rate caps, others lose them depending on lender charter and state action.

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)

Named in the bill

Federal Deposit Insurance Act (Section 27), Federal Credit Union Act (Section 205(g)), Depository Institutions Deregulation and Monetary Control Act of 1980 (Section 525), State-chartered banks, State-chartered credit unions, Out-of-state depository institutions, Insured depository institutions, Insured credit unions

Where it stands

7 cosponsors: 4 Democrats, 3 Republicans.

• Mar 9, 2026 — Introduced · Congress.gov: “Introduced in House”
• Mar 9, 2026 — Referred to House Committee on Financial Services · Congress.gov: “Referred to the House Committee on Financial Services”
• Sep 16, 2026 — Markup held in committee · Congress.gov: “Committee Consideration and Mark-up Session Held”
• Sep 16, 2026 — Reported out of committee · Congress.gov: “Ordered to be Reported (Amended) by the Yeas and Nays: 31 - 18”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

6 lobbying clients named this bill on 6 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $3,195,000 in lobbying spend. A filing names 13 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 82% of bills with at least one filing.

Warren Davidson, the sponsor, reported $281,400 in PAC receipts in the 2026 cycle.

• Toyota Motor North America Inc (tma) — $1,930,500 on 1 filing
• Consumer Bankers Association — $1,030,000 on 1 filing
• American Fintech Council — $110,000 on 1 filing
• Bread Financial Payments, Inc. — $50,000 on 1 filing
• Bread Financial (fka Alliance Data Systems Corporation) — $40,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.