The U.S. House Financial Services Committee advanced legislation on Sept. 16 that stops states from forcing their own interest rate limits onto loans made by banks and credit unions chartered in other states.
The American Lending Fairness Act of 2026, H.R. 7866, sponsored by U.S. Rep. Warren Davidson (R-OH), would eliminate the dispute over where a loan is “made in.”
To understand what “made in” means, it goes back to the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), which was enacted to deregulate deposit-rate limits, extend the Federal Reserve’s monetary policy reach across depository institutions, and make competition fairer among banks and credit unions.
One section of the Act, Section 521, allows FDIC-insured, state-chartered banks to charge the interest rate allowed in their home state, or a specified federal alternative, despite conflicting state usury caps. Section 525 allows a state to expressly opt out of Section 521’s interest-rate rules for loans “made in” that state.
The issue is the legal meaning for the term “made in.” The key question is whether a loan is “made in” a state based on the bank’s location and lending activity, the borrower’s location, or both. This distinction determines whether a state’s DIDMCA opt-out can limit an out-of-state state-chartered bank’s interest rate for loans to that state’s residents.
The American Lending Fairness Act of 2026 would eliminate the dispute over where a loan is “made in” by replacing DIDMCA’s Section 525 opt-out framework. Under this bill, a state could cap rates charged by institutions it charters, but it could not use its opt-out to restrict an out-of-state state-chartered bank or credit union lending to that state’s residents. Thus, it stops states from forcing their own interest rate limits onto loans made by banks and credit unions chartered in other states.
“Borrowers should be free to shop for whatever loan works best for them, regardless of which state the lender is chartered in,” said Davidson. “My American Lending Fairness Act protects that freedom by putting state-chartered banks and credit unions on equal footing with the largest national banks. When more lenders compete for business, borrowers get better rates.”
The bill now moves to the full House for consideration.