March 7, 2018

Whitehouse Proposals Would Strengthen Economy, Create Jobs By Boosting Lending to Small Businesses, Protecting Borrowers

Small Business Lending Enhancement Amendment would help create 140K jobs nationwide

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 jobs nationwide. 

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 moot. 

Whitehouse is a member of the Senate Finance Committee.


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