Washington, DC – Today, Senators Sheldon Whitehouse (D-RI),
Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Jack Reed (D-RI), and Bernie
Sanders (I-VT) introduced legislation to protect Americans from runaway credit
card and other consumer loan interest rates. The Empowering States’
Rights to Protect Consumers Act would restore states’ ability to limit consumer
loan interest rates for their residents and help address the over $1 trillion
Americans hold in credit card debt.
“Right now, Wall Street banks and their credit card
subsidiaries can jack up interest rates on American consumers against state
laws. States should be able to protect their citizens,” said Senator
Whitehouse. “This will bill will help states like Rhode Island control
abusive credit card rates and protect their residents.”
“We need to ensure states have the ability to enforce their
own rules against lenders doing business within their borders,” said Senator
Warren. “States should be empowered to take action to protect consumers from
tricks and traps buried in the fine print by credit card companies.”
“Allowing a race to the bottom in state bank regulation is
dangerous and puts every American consumer at risk. This bill ensures
that states are able to stand up for their own consumers and enforce the strong
consumer financial protections on their books,” said Senator Merkley.
“States should have the power to protect their citizens, but
federal courts have prevented states with strong consumer protection laws from
fully enforcing them. This bill would restore Rhode Island’s ability to
protect citizens from abusive interest rates,” said Senator Reed.
“Big banks need to stop acting like loan sharks and start
acting like responsible lenders,” Senator Sanders said. “If we are going
to create a financial system that works for all Americans, we have got to stop
financial institutions from ripping off the American people by charging sky-high
Since the very founding of our country, each state had the
ability to enforce usury laws against any lender doing business with its
citizens. That changed in 1978 when the Supreme Court in Marquette
National Bank of Minneapolis v. First of Omaha Service Corporation decided that
a national bank is bound only by the lending laws of the state in which the
bank is based, rendering states powerless to impose lending restrictions
against lenders headquartered in other states. This decision effectively
ended usury protections in the United States, as credit card companies located
in states with weak or non-existent consumer lending protections. Without
these protections, many consumers now get stuck with interest rates of 30
percent or more.
The Senators’ bill would amend the Truth in Lending Act of
1968 to clarify that consumer lenders—regardless of their location or legal
structure—must abide by the interest rate limits of the states in which their
customers reside. Rhode Island, for example, had a state-level
interest-rate cap for many years, but abandoned the cap after the Marquette
decision rendered it moot. The Empowering States’ Rights to Protect
Consumers Act would allow Rhode Island to re-instate a cap.
According to a study by personal finance website NerdWallet,
American households with credit cards averaged
balances totaling $16,883 in 2016, and paid an average of $1,292 in credit card
interest every year. Total debt in the United States increased 11 percent
in the past decade to $137,063 per household.
Whitehouse and Warren introduced similar legislation in the
113th and 114th Congresses.