Whitehouse, Reed, Warren, Sanders and Merkley introduce bill to protect Americans from sky-high credit card rates
Whitehouse, Reed, Warren, Sanders and Merkley introduce bill to protect Americans from sky-high credit card rates


Legislation would allow states to cap consumer loan interest rates for their residents

washington d.c. – US Senators Sheldon Whitehouse (D-RI), Jack Reed (D-RI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT) and Jeff Merkley (D-OR) introduced legislation to protect Americans against exorbitant interest rates for credit cards and other consumer loans. The Empowering States’ Rights to Protect Consumers Act would restore states’ ability to cap consumer loan interest rates for their residents and help address the more than $850 billion Americans are holding in card debt credit.

“Rhode Islanders are feeling a blow to their wallets from corporate profit and inflation, which is pushing some to take on credit card debt to ease the burden,” said Senator Whitehouse. “This bill will allow individual states like Rhode Island to cap runaway credit card rates and protect their citizens from Wall Street greed.”

“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 predatory interest rates,” said Senator Reed.

“Giant banks and predatory lenders have exploited loophole after loophole to burden families with exorbitant interest rates and fees,” said Senator Warren. “I am pleased to reintroduce this legislation to restore states’ ability to protect their citizens from exorbitant interest rates that threaten consumers’ wallets and financial futures.”

“Until the Marquette Supreme Court decision, about half of the states in the country had usury laws on the books capping interest rates on credit cards and other consumer loans,” said Senator Sanders. “It’s time to reverse Marquette’s disastrous decision and end payday lenders, big banks and credit card companies charging exorbitant fees and outrageous interest rates at the expense of working people.”

“Predatory loans with exorbitant interest rates are sucking working families into an inescapable debt vortex,” said Senator Merkley. “In Oregon, we went after payday lenders and capped the outrageous interest they were charging. This bill empowers states with strong consumer protection laws, like Oregon, to actually protect consumers. The simple and straightforward approach of this bill will ensure that families are not bankrupted by high interest rates.

Since the founding of our country, each state had the ability to enforce usury laws against any lender doing business with its citizens. This changed with the 1978 Supreme Court decision in Marquette National Bank of Minneapolis v First of Omaha Service Corporation, which ruled that a national bank is only bound by the lending laws of the state in which the bank is based. This rendered states powerless to impose lending restrictions on lenders headquartered in other states. The move effectively ended usury protections in the United States because credit card companies are located in states with weak or no consumer loan protections. Without these protections, many consumers end up with double-digit interest rates.

Senators’ bill, S.4072, would amend the Truth in Lending Act of 1968 to clarify that consumer lenders — regardless of location or legal structure — must adhere to state interest rate limits in where their customers reside. For example, Rhode Island enjoyed strong state-level interest rate protections for many years, but they were reduced after the Marquette decision. The Enabling States Rights to Protect Consumers Act would strengthen Rhode Island’s ability to protect its citizens from loan sharking.

“As a Rhode Island-based nonprofit provider of financial coaching and small personal loans, we’ve seen firsthand the impact high-interest credit has on families,” said Capital Good Fund founder and CEO Andy Posner. “The COVID-19 pandemic has once again highlighted how crucial it is for consumers to be protected against unfair practices. Senator Whitehouse’s legislation will ensure states have the tools to do so, which is why we support this Enabling States Rights to Protect Consumers Act.

“Restoring order in interstate lending is paramount for consumers living on the margins. This bill revives the validity of state rate caps and hopefully allows more Americans to escape the pitfalls of the debt that the payday lenders have put in place”, said Elyse Hicks of Americans for Financial Reform. “It’s a step in the right direction towards a uniform price cap system that would completely eliminate this problem.”

The legislation is also endorsed by the Consumer Federation of America.

Credit card balances increased by $52 billion to $860 billion in the last three months of 2021, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit. This is the largest quarterly increase in the data’s 22-year history.

The full text of the bill is available here.

press contact

Rich Davidson/Meaghan McCabe, (202) 228-6291 (press office)

Next article Previous article


Please enter your comment!
Please enter your name here