A federal lawsuit could undo Oregon's new cap on sky-high interest rates — potentially exposing Bethany-area residents and small business owners to out-of-state lenders charging as much as 200% interest again.

What the law actually does.

House Bill 4116, which took effect in June, caps interest at 36% on loans of $50,000 or less. Before this law, at least five lenders — mostly based in Utah — used a federal loophole to charge Oregon borrowers between 73% and 200% interest. Since 2020, those lenders issued more than 31,000 loans totaling at least $61 million to Oregonians, mostly short-term loans averaging around $3,000.

Who's suing, and why.

Three lending industry trade groups sued Oregon just a week after the law took effect, according to Oregon Capital Chronicle. They argue the law illegally regulates out-of-state banks, violating the U.S. Constitution's Commerce and Supremacy Clauses, and have asked the court to block the law while the case plays out. Big banking groups have piled on in support, including the American Bankers Association and the FDIC.

Why Oregon's sponsor isn't worried.

Rep. Nathan Sosa, the Hillsboro Democrat who wrote the bill, said he expected this fight. He points to a similar Colorado law that survived a legal challenge on appeal, though that case is now headed for a bigger rehearing later this month. Since Oregon sits in a different appeals court circuit, that ruling wouldn't directly decide Oregon's case — but courts often look to each other for guidance. Sosa also argues borrowers won't actually lose access to credit: 98% of lenders already follow Oregon's 36% cap, and several still serve people with no credit or poor credit.

The other side's argument.

Danielle Arlowe of the American Financial Services Association counters that the law simply cuts off options for borrowers who already have few choices to begin with.

What happens next.

No hearing date has been set yet. Both sides file briefs through September, with a ruling possibly coming this fall. If the court sides with the lenders, Bethany-area borrowers and small businesses could once again face triple-digit interest rates on loans up to $50,000.