Tenth Circuit Limits Rent-a-Bank Schemes

Predatory lenders use rent-a-bank schemes to evade state usury limits and charge astronomical rates—100%, 500% and even higher—that are illegal in as many as 45 states.  In a classic rent-a-bank scheme, a high-cost lender “rents” a state bank chartered in a state without usury limits for banks and then evades other states’ usury caps by bootstrapping onto a bank’s ability to export its home state usury law throughout the country. 

This article first explains a November Tenth Circuit decision that severely limits rent-a-bank schemes in Colorado. The article then considers other challenges to rent-a-bank arrangements targeting consumers in other states that may offer consumers significant remedies.

This article cites to the recent digital update to the new 2025 Fourth Edition of NCLC’s Consumer Credit Regulation. 

Rate Exportation and Rent-a-Bank Explained in Two Paragraphs

Banks’ federal right to export their home state usury caps to other states around the country has resulted in most banks basing themselves in states that do not have usury caps or that have exempted banks from their rate caps. Federal rate exportation statutes allow banks to ignore the applicable usury cap of the consumer’s state and charge any rate allowed in the bank’s home state.  (Rate exportation statutes also allow banks to charge 1% over the current federal discount rate, which now is about 4%, even if a state’s usury cap is lower.  This article ignores this aspect of rate exportation for simplicity and because it has no current practical application.) See NCLC’s Consumer Credit Regulation § 3.2.

Nonbank lenders, because they must comply with the laws of the consumer’s state, may turn to a rent-a-bank scheme to engage in high-cost lending. A bank with rate exportation rights plays a nominal role by originating the loans and then assigns the loan or most of the receivables to the nonbank high-cost lender or a related entity.  But the loan program is typically owned and run by the nonbank, which develops and brands the loan product, designs the underwriting criteria, runs a website, markets and solicits loans, processes applications, approves or recommends approvals, services and collects the loan, receives most of the profit from the loan (as high as 96%), and takes on almost all the economic risk of default.

State Opt-Out of Rate Exportation (and of Rent-a-Bank Abuses) by State-Chartered Banks

An underutilized option for states to avoid rent-a-bank abuses is for the state to opt out of the federal law, the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), that allows state banks to export their home state usury cap into the opt-out state.  The state can opt out simply by passing a law or referendum indicating the desire to opt out.  See NCLC’s Consumer Credit Regulation § 3.3.3.2. The opt-out does not apply to national banks’ or federal savings associations’ ability to export their home state rate.  But currently, most high-cost rent-a-bank schemes involve state banks.  

Presently only three jurisdictions have opted out of rate exportation— Iowa and Puerto Rico in the early 1980s, and Colorado in 2024. 

A state’s DIDMCA opt-out applies to loans “made in such state.” The meaning of this opt-out is subject of the Tenth Circuit decision discussed immediately below. Opt-out legislation has also been considered recently in other states.  See NCLC’s Consumer Credit Regulation § 3.3.3.2.

An opt-out’s impact is largely focused on high-cost loans otherwise illegal in the opt-out state. Most banks do not make loans that significantly exceed state rate caps. An opt-out hardly affects credit card rates—most major card issuers are national banks unaffected by the state opt-out, though some store cards are issued by state banks.  Moreover, a state’s own banks are unaffected by the opt-out when lending in their home state—the applicable usury cap is the bank’s home state cap. 

Tenth Circuit Reaffirms Power of Opting Out to Limit Rent-a-Bank Loans

This November, the Tenth Circuit, in National Association of Industrial Bankers v. Weiser, 2025 WL 3140623 (10th Cir. Nov. 10, 2025), reversed a district court ruling and found that Colorado’s opt-out from rate exportation by state-chartered banks protects Colorado citizens from rent-a-bank loans using banks from other states. The district court had agreed with three banking associations that construed the phrase “made in such state” to mean that the opt-out right only impacted loans made by banks located in the opt-out state. 

The Tenth Circuit instead found that two parties are needed to make a loan—the lender and the borrower—and that a loan is “made in” both the state where the bank is located and the state where the consumer resides. The court found that DIDMCA’s language was clear and consistent with the congressional intent that when a state opts out of rate exportation, that this applies both to out-of-state banks making loans to Colorado consumers and to Colorado banks making loans.  This effectively ends the use of rent-a-bank schemes using out-of-state, state-chartered banks to make loans to consumers in Colorado. The Tenth Circuit decision is examined in more detail in NCLC’s Consumer Credit Regulation § 3.3.3.3.

As noted above, today only Colorado, Iowa, and Puerto Rico have opted out of rate exportation by state-chartered banks.  This article describes other ways for consumers in other states to challenge rent-a-bank schemes and other high-rate lending by showing that: 

• The nonbank is the true lender and that true lender has no rate exportation rights;
• State laws dealing with credit arrangers and assignees still apply to nonbanks even if the bank is the true lender;
• The rate exportation at the core of the rent-a-bank scheme itself has limits; and
• A rent-a-bank loan must comply with the credit regulations in the consumer’s state other than that state’s usury cap.

Attacking Rent-a-Bank Loans Where Nonbank Is the True Lender

An important way to attack a rent-a-bank scheme is to establish that the bank is only the nominal lender, and that the nonbank is the true lender.  Because the nonbank cannot export rates, if the nonbank is the true lender, the loan must comply with the usury cap of the consumer’s state, not the bank’s state.

The true lender doctrine is an application of the over 200-year-old common law rule that usury caps cannot be evaded by mere wording and that substance trumps form. The true lender doctrine allows a court to look beyond the bank’s name on a loan and to find that the nonbank is the true lender. The doctrine applies regardless of whether the bank is state or federally chartered.

The common law true lender doctrine has been recognized in a variety of contexts in over thirty court decisions, including in at least seven decisions from federal circuit courts of appeal,, plus in several state administrative actions, and by interpretations from about half of the state attorneys general.  See NCLC’s Consumer Credit Regulation § 3.4.3.2. 

Nor do the federal rate exportation statutes preempt this doctrine. Predatory lenders have attempted to raise preemption challenges to true lender claims, but courts have generally rejected such challenges. See NCLC’s Consumer Credit Regulation § 3.4.3.3.

Statutes in ten states have codified the true lender doctrine in at least some of their lending statutes, though some are only in their payday loan statutes and not in the statutes governing the installment loans that predominate today in rent-a-bank lending. See Cal. Fin. Code § 23037 (West); Conn. Gen. Stat. § 36a-556; Ga. Code Ann. § 16-17-2(b)(4); 815 Ill. Comp. Stat. 123/15-5-15(b); Me. Stat. tit. 9-A, § 2-702; Minn. Stat. § 47.60(8); Nev. Rev. Stat. §§ 604A.5064(2)(b), 604A.5089(2)(b), 604A.200; N.H. Rev. Stat. Ann. § 399-A:2(III)(c); N.M. Stat. Ann. § 58-15-3(D)(3); Wash. Rev. Code § 31.04.025(2). 

Courts use several factors to determine if the nonbank is the true lender.  A common test, most often cited by courts, is which party has the predominant economic interest in the transaction. But that is only one factor; because predatory lenders are endlessly creative, courts focusing on substance over form can look at the totality of the circumstances. Factors that may show the nonbank is the true lender include where the nonbank:

• Designs, brands, or holds the intellectual property on the loan product, drafts the loan documents, or controls the loan terms;
• Markets and offers the loan, or runs the website or storefront or takes and processes applications;
• Designs the underwriting criteria, reviews applications, or makes approval decisions;
• Provides the ultimate funding or bears the primary risk of loss or pays the bank’s expenses;
• Services the loan, handles customer service, and manages collections.

See generally NCLC’s Consumer Credit Regulation § 3.4.3.4.

These are all factual questions and should give the consumer the right to extensive discovery. The consumer’s usury claim against the nonbank thus should not be lost at the motion to dismiss or even summary judgment stage, It must be determined by the trier of fact. See generally NCLC’s Consumer Credit Regulation § 3.4.3.5.

Nonbank’s Liability as an Arranger or Assignee of the Bank Loan

Even if the bank is the true lender, the nonbank as an arranger or assignee of credit generally will need to comply with the applicable laws of the consumer’s state. State law may place on a nonbank arranger or assignee various requirements through a licensing statute, a creditor services organization act, loan broker legislation, state debt collection law, an anti-evasion provision, laws against unfair or deceptive practices, or other state law. See generally NCLC’s Consumer Credit Regulation § 3.4.5.1. 

A state may even have a law restricting nonbank entities from offering or acting as agents in connection with loans at interest rates that exceed those allowed under that state’s law. See, e.g., Md. Code Ann., Com. Law § 14-1902(9). Maryland’s highest court upheld application of that statute to a rent-a-bank scheme in CashCall, Inc. v. Maryland Comm’r of Fin. Reg., 139 A.3d 990 (Md. 2016). See generally NCLC’s Consumer Credit Regulation § 3.4.4.

Federal preemption is unlikely to apply to these state laws regulating nonbanks.  Federal banking law provides that it should not be interpreted as preempting, annulling, or affecting the applicability of state law to any nonbank subsidiary, affiliate, or agent of a national bank.  See 12 U.S.C. § 25b(h)(2).  This standard should also apply to nonbank subsidiaries, affiliates, or agents of state banks because Riegle-Neal relies on national bank preemption to provide preemption relating to state bank compliance with non-interest law of the consumer’s state.  See generally NCLC’s Consumer Credit Regulation § 3.4.5.2.

Three Limits on Rate Exportation Limit Rent-a-Bank

Rate exportation is not as broad as many think and there are at least three limits to banks’ ability to export their home state interest cap.  Any rent-a-bank scheme or other high-cost loan relying on rate exportation where it is unavailable can result in significant consumer remedies. 

  1. Only Certain Lenders Originating Loans Can Export Rates

National banks and federal savings associations can export rates. So can state banks, state savings banks, industrial loan banks, and state credit unions, but only if they are federally insured. State depositories, including crypto banks, national trust banks, employer-based credit unions, may not be federally insured.  No other lender can export rates. Moreover, subsidiaries of national banks and federal savings associations cannot export rates, unless they qualify independently as a national bank or federal savings association. See NCLC’s Consumer Credit Regulation§ 3.3.

Federal credit unions cannot export rates but instead are subject to their own interest rate caps that preempt any state cap.  Currently the cap is generally an 18% annual percentage rate (APR) but small loans can charge 28% APR plus a $20 origination fee under the payday alternative loan regulations. See NCLC’s Consumer Credit Regulation§ 3.3.2.

Depositories also can only export rates if they originate the credit, not when later assigned a nonbank loan that was subject to a rate cap. When a car dealer initiates a credit sale and immediately assigns the paper to a bank, the applicable usury cap is that of the state where the car sale is made—no rate exportation is available.  But federal banking regulations (perhaps incorrectly) state that if a depository originates credit at a rate valid for that depository, the interest rate on the loan remains valid as made, even when later assigned to a nonbank. See NCLC’s Consumer Credit Regulation § 3.5.

  2.  Branch Banks May Be Subject to Consumer’s State Usury Cap 

Federal banking agency interpretations indicate that if the three core aspects of a loan—approving the loan, extending the credit, and disbursing the proceeds—take place in the consumer’s state at a branch of an out-of-state bank, for rate exportation purposes the applicable usury cap for that loan is that of the consumer’s state. Banking regulations are more complicated if only certain, but not all of the core aspects of a loan take place at the branch.  See NCLC’s Consumer Credit Regulation § 3.6.3. 

This restriction on rate exportation will have limited application to rent-a-bank schemes because they do not involve branches in the consumer’s state and certainly the loan functions do not involve that branch—most loan functions are performed by the nonbank. But for purposes of the Riegle-Neal exception discussed below, banks may claim a loan is made by the branch and then rate exportation may not apply.

  3.  Banks Exporting Home State Rates Are Subject to Their Home State Usury Caps 

Rate exportation does not abolish state usury caps but instead allows banks to utilize the usury cap that applies to banks in their home state. Banks wanting to do national lending typically locate in a state with a permissive or non-existent usury cap, but a loan must still comply with that interest cap—there are significant federal remedies if it does not.  See NCLC’s Consumer Credit Regulation § 3.9.

The bank’s applicable home state usury cap is complicated by the doctrine of most favored lender, allowing banks to charge the same rate as the highest rate allowed in the bank’s home state for any state lender. There are two limits to the most favored lender doctrine. 

The loan must be of the same type that the other state lender can make—a bank may not use finance company rates when the bank makes a loan that finance companies cannot make. See NCLC’s Consumer Credit Regulation § 3.8.5.  The bank in using the other lender’s usury cap is also subject to material statutory restrictions used to determine that interest cap.  If the other lender’s rate cap calculation must include loan fees, the bank’s usury calculation must do so as well. See NCLC’s Consumer Credit Regulation § 3.8.6.

Rent-a-Bank Schemes May Be Subject to the Consumer’s State Credit Laws Other Than Interest Caps

Rate exportation applies only to a bank’s ability to use its home state interest rate cap, not other aspects of its home state credit regulation. Different federal laws impact whether other types of laws where the consumer resides apply to out-of-state banks, and those laws have some limits.

First, national banks and federal savings associations can ignore the consumer’s state non-interest credit regulation if and only if the law prevents or significantly interferes with the bank’s powers.  Many state laws will not be preempted under that standard, including laws against unfair or deceptive acts and practices (which are illegal under federal law as well), and some more substantive laws. While the contours of the “prevent or significantly interferes” standard and what state laws apply are still being worked out by the courts, a 2024 Supreme Court decision, Cantero v. Bank of Am., N.A., 602 U.S. 205 (2024), has breathed life into the limits of this type of preemption. See NCLC’s Consumer Credit Regulation Ch. 4. 

Second, the Riegle-Neal federal statute extends prevent/significantly interfere preemption to branches of out-of-state, state banks in the consumer’s state.  Thus, if a state non-interest rate law in the consumer’s state would be preempted as to a national bank, it is also preempted as to out-of-state branches of state-chartered banks, and those banks instead must comply with bank’s home state credit regulation.  See NCLC’s Consumer Credit Regulation § 4.2.6.2. 

Nevertheless, Riegle-Neal does not help rent-a-bank schemes, because the statute only extends preemption to physical branches of out-of-state chartered banks, not activities in another state. Most state banks involved in rent-a-bank schemes do not have branches outside their home state, so Reigle-Neal preemption does not apply. Reigle-Neal also may not apply even when the bank has a branch in the consumer’s state, but the loan is not made at that branch. Loan functions are likely performed by the nonbank and the bank’s main office.  If the loan is claimed to be made completely by the branch, then the loan may not be subject to rate exportation.  See “Branch Banks May Be Subject to Consumer’s State Usury Cap,” infra. 

Thus, out-of-state, state-chartered banks may be subject to state licensing laws (potentially making loans by unlicensed lenders void), as well as laws governing other aspects of a loan such as disclosures, notices, repayment options, and choice of law. See NCLC’s Consumer Credit Regulation § 4.2.6.2.5. And, even if the bank’s home state laws apply, they may not be as permissible as the state’s usury laws.

Third, the consumer’s state parity statute may (or may not) allow state banks to avoid the same aspect of state regulation that is preempted as to national banks. Parity laws, which generally govern interest rates but can apply to other issues, allow banks in a state to follow the same rules that apply to other banks active in that state. But a state’s parity statute typically applies only to that state’s own banks and not to out-of-state banks. See NCLC’s Consumer Credit Regulation § 3.10.

All of these issues are discussed in greater detail in the most recent digital updates to NCLC’s Consumer Credit Regulation.