With Oregon Governor Tina Kotek’s signing of House Bill 4116 last week, which opts Oregon out of interest exportation effective early June 2026, a primer on exportation is in order.
The practice of law around usury and fees is actually quite complicated, particularly if you have to comply on a 50-state basis. Many state usury laws that limit interest rates date to the late 1800s and read that old. Often, these laws have been updated with amendments tacked on here and there. Concepts like compounding of interest can be secreted away in case law. As you read on, you’ll see that interest can encompass more than just the numerical periodic rate and include certain fees considered components of interest. Fee limits can be in the product-specific lending laws or in other nooks and crannies, such as civil procedure or criminal codes. These different places in the law may appear to conflict. There are a lot of moving pieces. Can you calculate numerical interest on a 360-day basis or does it have to be 365? Must you rebate prepaid finance charges on an early payoff? Is the fee in or out of the usury cap? Can you charge higher default interest? And, so on. Then you have to interpret the provisions. If a law says you may charge the five fees listed, do you interpret it as permissive and allowing a sixth or more conservatively as prohibiting fees not listed? What if the law is silent? There’s much more complexity, but you get the idea.
You do have to spend time getting interest and fee compliance right because charges are low-hanging fruit for regulator exams and plaintiff’s counsel action — if you don’t get them right, consumer harm is easy to quantify. Interest exportation simplifies this work because, for interest, you are focused on the interest provisions of law in the single state you export nationwide from, not the hodgepodge of 50 states.
In this Fintech Flash, we break down the concept of interest exportation. We start off by distilling it into a single sentence, then we elaborate on its key terms of art.
What Is “Interest Exportation”?
Interest exportation is the power a bank has to charge the interest permitted to the most favored lender in the state where the bank is located to all borrowers across the country, except, in the case of a state-chartered bank, borrowers in states that have opted out of exportation.
Here’s a simple example of this power in practice: Say, State A has completely deregulated interest, and State B has a usury cap of 25% and hasn’t opted out. A bank located in State A can charge its borrowers residing in State B more than 25%.
The policy behind interest exportation promotes efficient, less costly, interstate lending by banks via empowering them to operate nationwide under a single framework interest charge–wise. The policy facilitates more available and affordable credit.
What Constitutes “Interest”?
The FDIC1 and OCC2 regulations define “interest” for the banks they supervise as any payment compensating a creditor for an extension of credit or any default or breach by a borrower of the credit agreement.3 The regulations include the following illustrative list of fees that are considered interest in addition to the numerical periodic rate: late fees, NSF fees, overlimit fees, annual fees, cash advance fees, and membership fees.4
The OCC has issued interpretive letters finding additional fees to be interest, including account opening fees and prepayment penalties on the basis that both are alternatives to a higher interest rate and are part of the compensation banks receive from borrowers for making loans.5 Using this test as the decoder ring, discount points and origination fees should be considered interest too, because they’re associated with getting a lower interest rate and are compensation for banks.6
The OCC and FDIC definitions of “interest” also give examples of fees that would not be considered interest, including appraisal fees, insurance premiums, finders fees, fees for document preparation or notarization, and fees incurred to obtain credit reports.7 The test here would be fees that are specifically assigned to cover the cost of an activity or service aren’t interest.8 Applying this test, processing fees wouldn’t be interest as they are for a specified activity.
So, when a bank exports interest, it exports not just the numerical periodic rate but also the fees that are considered components of interest, such as origination, annual, late, and NSF fees.
Who Is This Phantom “Most Favored Lender”?
What interest can a bank export? The interest permitted to the “most favored lender” of the state where the bank is located.9 The “most favored lender” is the lending institution chartered or licensed by the state that can charge the highest interest rate and interest fees for the subject class of loan. Which means, for example, if a bank desires to make a small loan product and charge origination fees, numerical interest, late fees, and NSF fees on the product, and a state-licensed small loan company can charge those rates and fees without limitation, the licensed small loan company would be the most favored lender.
Interestingly, the most favored lender principle is product-specific, meaning, for example, if a bank wanted to offer a small loan product and a HELOC product, and the most favored lender for small loans is a state-licensed small loan company and the most favored lender for HELOCs is a state-chartered credit union, then the bank may proceed interest charging-wise like a licensed small loan company for small loans and like a state credit union for HELOCs.10
Other Than the Permitted Interest Rate or Amount, What Else Do You Export?
Banks just don’t export the interest rate or amount permitted, but alongside they must also export related provisions of state law that are material to the determination of the permitted interest.11 Illustrations are the best way to explain this concept:
- The most favored lender may charge unlimited origination fees, but governing state law provides that, in the event of prepayment, prepaid finance charges (e.g., origination fees) must be pro rata refunded calculated according to the remaining term of the loan. The rebate provision must be exported along with the permissive origination fee provision.
- The most favored lender may charge a late fee up to 10% of the late payment amount after 20 days of grace. The 20-day grace period provision must be exported with the 10% limit.
- The most favored lender may charge unlimited annual fees, but if an account is closed, a pro rata refund of the annual fee must be calculated according to the days remaining in the annual period. The refund must be exported too.
Exporting the “rules of the road” for interest as well makes sense because they go to the timing, calculation, and ultimate retention of interest.
Where Is a Bank “Located”?
We’re down to location, location, location.
A bank may export what the most favored lender can charge in the state where the bank is “located.” Banks with all their operations in a single state are “located” in that state. Interstate banks have location options. A bank with its main office in one state (home state) and branches in one or more other states (each, a host state) may be located in, and export interest from, either their home state or a host state, depending on which state/location the bank places its so-called lending “non-ministerial functions” — loan approval, communication of decision to lend, and disbursal of loan proceeds.12 According to a February 2026 press release, Cross River Bank, a New Jersey–chartered bank with its main office in Fort Lee, New Jersey, opened a full-service branch in Wilmington, Delaware. Doing so and placing its non-ministerial functions in its Delaware branch would permit Cross River Bank to export Delaware’s more favorable interest, instead of New Jersey’s more restrictive interest.
As far as Exportation Is Concerned, Is There a Difference Between National Banks and State-Chartered Banks?
The ability of states to opt out of interest exportation only applies to state banks,13 not national banks. Currently, Iowa, Oregon, Colorado,14 and Puerto Rico have enacted statutes that opt them out of state bank exportation. Other states could still opt out of state bank exportation. However, states can’t currently opt out of national bank exportation. Only national banks can truly export interest on a uniform, nationwide basis.15
Are Loan Buyers Sheltered In?
Yes, both the FDIC and OCC have “valid when made” regulations expressly providing that if a loan’s interest was legal at the time it was originated by a bank, that interest remains legal after the loan is sold, assigned, or transferred to a third-party buyer, even if the buyer isn’t a bank.16
Remember, valid when made is different than “true lender.” Read our previous Flash on true lender to learn more.
What’s There to Do?
De novo bank charter activity is currently hot, and organizers of those new banks should put scoping out where they will be “located” and how favorable interest is to the most favored lender in their location state near the top of their punch lists. Not all states are equal in this regard. For instance, New York’s civil usury (16%) and criminal usury (25%) limits can be a challenge for certain loan programs.
Every bank — new and old — with nationwide lending programs should have interest exportation charts by product providing support for the interest it charges. The chart should identify the most favored lender it’s based on and have rows for each interest charge that will be assessed (i.e., numerical periodic rate, origination fee, late fee, NSF fee, overlimit fee, annual fee, cash advance fee, membership fee, prepayment penalty, and any other fees considered interest) and columns for (i) amount or rate limits and (ii) provisions of applicable law that are material to the determination of interest.
State banks should take stock of the interest limits in Iowa, Oregon, Colorado, and Puerto Rico that purport to apply to out-of-state banks.
Finally, and critically, before a fintech company with a lending solution approaches a bank partner for a term sheet, it should prepare a similar exportation chart for the bank’s location state and assess whether any interest limitations the bank faces would work for the program.
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Goodwin’s Fintech Team
Our Fintech team counsels fintech companies, banks, investors, and other participants in the fintech and consumer financial services spaces on regulatory, transactional, enforcement, and litigation matters. An important part of our regulatory work is helping clients build compliant products and services. Our team is led by partners Crystal Kaldjob, Kim Holzel, Alex Callen, Sammy Tang, and Mike Whalen. The team is highly ranked by Chambers and Legal 500.
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[1] The FDIC is the primary federal banking regulator for state banks. ↩
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[2] The OCC is the primary federal banking regulator for national banks. In this Flash, we do not discuss federal savings banks, the other federal charter supervised by the OCC. Federal savings banks have the same interest exportation power as national banks. See 12 USC § 1465; 12 CFR §§ 7.4010(a), 34.6. ↩
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[3] See 12 CFR §§ 7.4001(a), 331.2 (definition of “interest”). ↩
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[4] Id. ↩
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[5] See OCC Interpretive Letter No. 744 (Aug. 21, 1996); OCC Interpretive Letter No. 803 (Oct. 7, 1997). ↩
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[6] Interest exportation parity is intended between national banks and state banks, except on state opt-out discussed in section “As far as Exportation Is Concerned, Is There a Difference Between National Banks and State-Chartered Banks?” See, e.g., 12 CFR § 333.1(a). As a result, an OCC interpretive letter on fees considered interest would be highly persuasive for state banks, and similar FDIC opinions would be equally persuasive for national banks. ↩
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[7] See 12 CFR §§ 7.4001(a), 331.2 (definition of “interest”). ↩
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[8] See Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 741 (1996). ↩
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[9] See 12 CFR §§ 7.4001(b), 331.4(b). ↩
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[10] Id. ↩
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[11] Id. ↩
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[12] See OCC Interpretive Letter No. 1171 (June 1, 2020); OCC Interpretive Letter No. 822 (Feb. 17, 1998); FDIC General Counsel’s Opinion No. 11, 63 FR 27282 (May 18, 1998). ↩
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[13] See 12 U.S.C. 1831d note. ↩
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[14] In 2023, Colorado enacted its opt-out statute, which is subject to ongoing litigation before the U.S. Court of Appeals for the Tenth Circuit. ↩
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[15] National bank charters are attractive in additional ways for nationwide lending programs. National banks also enjoy federal preemption of state non-interest fee limitations and preemption of a wide range of other state limitations, such as, for example, limitations on licensing, loan terms, disbursements, repayment, disclosures, and advertising. See 12 CFR §§ 7.4002, 7.4008, 34.4. State bank charters don’t have the same benefits. ↩
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[16] See 12 CFR §§ 7.4001(e), 331.4(e). ↩
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