Washington, D.C. – U.S. Senator Sheldon Whitehouse today
offered two proposals to strengthen the local economy and encourage small
businesses to hire more workers by boosting small banks and credit unions and
protecting Rhode Island borrowers. The proposals were submitted as
amendments to a bill currently before the Senate that would undo parts of the
2010 Dodd-Frank Act. Whitehouse voted against the legislation in a
procedural vote allowing debate to begin on the bill.
“Congress should be focused on making sure responsible
lenders can provide enough capital to small businesses that are hiring, rather
than rolling back the safeguards we put in place to prevent big banks from
causing another financial crash,” said Whitehouse. “My amendments would
strengthen Rhode Island’s economy and create jobs by giving small banks and
credit unions the flexibility to make strategic investments in the local
economy and keeping more money in the pockets of borrowers.”
The Rhode Island Small Business Lending Enhancement
Amendment would cut through red tape and encourage small business growth by
increasing an arbitrary federal cap on credit union lending that has restricted
lending to small businesses in recent years. The Credit Union National
Association estimates the provision would allow credit unions to lend an
additional $13 billion to small businesses helping to create more than 140,000
Prior to an arbitrary cap on credit-union lending instituted
in 1998, credit unions had been making unfettered small-business loans for
nearly a century. The Whitehouse amendment would raise the cap for
well-capitalized credit unions from 12.25 percent of assets to 27.5 percent.
Senator Whitehouse was the lead Democratic cosponsor of
similar legislation introduced last Congress, the Small Business Lending
Enhancement Act. The legislation was supported by the Rhode Island Cooperative
Credit Union Association.
Whitehouse also introduced an amendment to protect Americans
from runaway credit card and other consumer loan interest rates. The
Empowering States’ Rights to Protect Consumers Amendment 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. It is
based on legislation Whitehouse introduced last year.
For many years, 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. As a result of the ruling, consumers now can get stuck with
interest rates of 30 percent or more.
The amendment would update 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 had a state-level interest rate cap for
many years, but abandoned the cap after the Marquette decision rendered it
Whitehouse is a member of the Senate Finance Committee.