April 4, 2019

Whitehouse, Warren, Merkley, Reed Introduce Bill to Protect Consumers from Runaway Credit Card Rates

Legislation would allow states to cap credit card interest rates for their residents

Washington, DC – U.S. Senators Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Jeff Merkley (D-OR), and Jack Reed (D-RI) have introduced legislation to protect Americans from runaway interest rates for credit cards and other consumer loans.  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 nearly $1 trillion Americans hold in credit card debt.

“Right now, Wall Street banks and their credit card subsidiaries can saddle consumers with outrageous interest rates, contributing to a cycle of debt that is tough to break out of,” said Whitehouse.  “This bill will restore the power of individual states to rein in abusive credit card rates.”

“Americans carried a combined $420.22 billion in credit card debt in late 2018 — which is often high-interest and puts a drag on people’s wallets and financial futures,” said Senator Warren. “Let’s pass this bill to help states protect their citizens from high interest rates that families can’t afford.”

“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 in this case, federal courts have prevented states with strong consumer protection laws from fully enforcing them.  This bill would restore the ability of states to protect citizens from abusive interest rates,” said Senator Reed.

Since the 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 get stuck with double digit interest rates.

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.

Credit card balances reached $944 billion in late 2018, an increase of about 4 percent over the previous year, according to NerdWallet.  The average U.S. household with credit card debt has an estimated $6,929 in balances carried from one month to the next.


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Meaghan McCabe, (202) 224-2921