What Are the Banking Laws and Regulations?

Colorado has some unique banking laws and regulations regarding consumer credit, and a recent law helps emphasize this point. If you have questions or concerns regarding your rights and ability to collect on consumer debt, don’t hesitate to consult with an experienced Colorado business and banking attorney.

A Limit on Out-of-State Bank Charges

The governor of Colorado recently signed a law – that will go into effect on July 1, 2024 – amending the state’s Uniform Consumer Credit Code (UCCC). In so doing, it opted out of a legal provision allowing banks that are state-chartered to preempt state interest rates that apply to consumer credit transactions. Prior to the state’s new law, which will apply only to transactions made after July 1, 2024, state-chartered banks were allowed to impose the interest rate employed by their state of location – regardless of the consumer’s location and regardless of any conflicting state laws.

For consumer loans under $1,000, the amendments include:

• The permissible acquisition charge on the original loan is reduced from 10 to 8 percent of the amount financed.
• The minimum loan term is increased from 90 days to 6 months.
• The permissible monthly installment account-handling charges are reduced based on categories of the amount financed.
• The number of times the lender can refinance a consumer loan is reduced to once a year.

An Attempt to Dissuade Predatory Lenders

Many consider the new law an attempt to dissuade lenders from predatory practices. The primary practice in question is often referred to as a rent-a-bank scheme in which lenders collaborate with banks in other states that may not have any interest cap in place and that are not the true lenders of the funds in question.

While some states have taken it upon themselves to prove when a so-called rent-a-bankisn’t the true lender, Colorado has adopted a much more direct approach by implementing a blanket requirement that out-of-state banks comply with the laws that Colorado banks are required to follow.

Colorado Has Strong Consumer-Friendly Protections in Place

Colorado has some of the strongest consumer protections in the country, which makes remaining on the right side of the law as a lender paramount. While lending laws vary considerably across the nation, Colorado has a cap of 31 percent APR – or annual percentage rate – which is quite reasonable relative to many of its neighbors. Consider the following:

• Utah has no cap
• Arizona has a cap of 41 percent
• Nevada has no cap

Seek the Guidance You Need from an Experienced Colorado Business and Banking Attorney

Colorado’s new consumer credit law represents a significant change in smaller consumer loans, which often add up to big business. The seasoned Colorado business and banking attorneys at Brown Dunning Walker Fein Drusch PC dedicate our practice to helping lenders like you protect their rights as creditors, and their bottom lines. For more information about what we can do for you, please don’t hesitate to reach out and contact us online or call 303-329-3363 to schedule an appointment today.