States reclaim power to cap interest rates—but only for their own banks
S. 3889 — American Lending Fairness Act of 2026 · Filed by Bernie Moreno (R-OH) · Introduced Feb 12, 2026 · Referred to committee
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What it does
This bill allows states to opt out of federal interest-rate caps on loans made by their own state-chartered banks and credit unions, but only for those in-state institutions—not for out-of-state lenders. It repeals the existing federal preemption rule (Section 525 of the 1980 Deregulation Act) and replaces it with a narrower one: states can now reclaim authority over interest rates on loans from their own banks, but federal caps still apply to loans from out-of-state institutions operating in that state.
Why we flagged it
The bill's core function is to restore state authority over interest-rate regulation for in-state-chartered lenders by repealing a federal preemption rule and replacing it with a narrower opt-in mechanism. It is fundamentally about federalism and regulatory jurisdiction, not a consumer protection or lending-access measure per se.
What the text implies
- Repealing Section 525 and replacing it with a state opt-out mechanism may create regulatory fragmentation: a national lender operating across multiple states could face different interest-rate caps in each state, increasing compliance costs and potentially leading to market segmentation.
- States that do not opt out remain subject to federal preemption, meaning their residents cannot benefit from state-level interest-rate caps even if their state legislature wishes to impose them—the bill does not restore state authority universally, only for states that affirmatively opt out.
The full analysis lists 4 implications of this text.
Who stands to gain
state-chartered banks; state-chartered credit unions; regional and community lenders