The Denver-based federal appeals court announced on Thursday that it will hold a rare all-judges review of a recent decision that permits Colorado to require out-of-state banks to abide by the state’s maximum interest rates when they lend to in-state residents.

Even more unusually, it is the second full-court hearing the U.S. Court of Appeals for the 10th Circuit has granted in a Colorado case recently. Next month, the judges will hear oral arguments in a criminal sentencing appeal originally decided by a three-judge panel in October.

Coincidentally, Judge Gregory A. Phillips, a Barack Obama appointee from Wyoming, authored the majority opinions under review in each case.

In the federal appellate courts, the vast majority of cases are decided in panels. Courts will occasionally vote to have all judges hear a case, known as an “en banc” review. Historically, the 10th Circuit receives approximately 190 requests per year, but grants fewer than one on average.

A key feature of en banc review is a circuit court’s ability to overrule prior precedents established in panel decisions, which are binding on the court itself. The chances for full-court review are better when there is a conflict between decisions, or the 10th Circuit is an outlier on a specific issue, with ramifications beyond the case being litigated.

In November, by a 2-1 vote, a panel overturned a trial judge’s injunction blocking Colorado from enforcing its interest rate cap against members of three finance industry groups. After the plaintiffs and multiple outside entities argued the decision would sow chaos in the interstate banking system, the 10th Circuit granted their request on April 2 to hear the case en banc.

Eleven of the court’s 12 full-time judges will participate in the hearing. Judge Scott M. Matheson Jr., an Obama appointee from Utah, has recused from the case without explanation.

Throughout the litigation, Colorado’s ability to impose its own maximum interest rates on out-of-state, state-chartered banks has hinged on the question of where a loan is “made.”

Amid rampant inflation in 1980, Congress passed Section 521, which allowed state-chartered banks to lend at interest rates up to their state’s cap or slightly above the federal rate, whichever was higher. The purpose was to ensure state-chartered banks in states with low interest rate ceilings could still afford to lend money and compete with nationally chartered banks.

However, a second provision, Section 525, granted states the power to opt-out and ensure state-chartered banks charged interest rates in line with their state’s law. The opt-out applies to loans “made in” the state.

In 2023, Colorado lawmakers chose to opt out through House Bill 1229. The state joined Iowa and Puerto Rico as the only other jurisdictions in the opt-out category. The bill’s sponsors explained the goal was to prevent out-of-state banks from “hopping around” Colorado’s consumer lending laws by charging higher interest rates for financial products than Colorado law allows for its institutions.

The National Association of Industrial Bankers, a trade group based in Utah, sued Colorado in conjunction with other industry associations over HB 1229. The groups sought to avoid letting Colorado apply its own ceilings on interest rates, which are somewhat lower than those elsewhere, to banks chartered by other states that lend to Colorado consumers.

In June 2024, U.S. District Court Chief Judge Daniel D. Domenico issued a preliminary injunction barring Colorado from applying its caps to the plaintiffs when they made loans from outside of Colorado to Colorado residents. He rejected the state’s argument that loans “made in” a state referred to either the bank’s state or the borrower’s state. Instead, the language referred to the bank’s location.

But a three-judge 10th Circuit panel overturned his injunction in November.

“We acknowledge that this decision may cause some immediate uncertainty,” wrote Phillips for himself and Judge Richard E.N. Federico, a Joe Biden appointee from Kansas. However, he stressed that the only question the panel answered was whether a specific federal law authorized Colorado’s interest rate policy, and not whether constitutional or other statutory provisions blocked the state’s legislative choice.

Judge Veronica S. Rossman, writing in dissent, believed the majority incorrectly interpreted the law and caused a “practical problem.” Now, the relevant interest rate for a loan is either the one in the borrower’s state or the one in the lender’s home state, with the potential for conflict.

“I struggle to see how this patchwork approach — which abides a level of disuniformity Congress never intended — will be administrable in our world of interstate, online banking,” wrote Rossman, a Biden appointee from Colorado.

The plaintiffs quickly sought en banc review, arguing states have never had the right to regulate other states’ banks. Republican-led states and the Office of the Comptroller of the Currency submitted supportive briefs, warning that Colorado’s law would inject uncertainty into Congress’ banking framework.

The Federal Deposit Insurance Corporation, which previously supported Colorado’s view, reversed course and also asked the 10th Circuit to block the state’s law.

“Most lending by out-of-state state-chartered banks to Colorado consumers falls well below Colorado’s interest rate caps and would be unaffected by Colorado’s opt out,” responded the Colorado Attorney General’s Office in urging the 10th Circuit to decline full-court review. “Colorado permits lenders to charge 36% on the first $1000 financed and 21% on larger loans and open-end credit. It is only a few state-chartered banks that partner with high-cost fintech lenders to evade Colorado’s interest rate protections that will be affected.”

The 10th Circuit’s order granting en banc review listed several questions for the parties to address, most of which pertain to the meaning of loans “made in” a state.

The case is National Association of Industrial Bankers et al. v. Weiser et al.