Washington, D.C. – As the Senate begins debate on landmark Wall Street reform legislation, U.S. Senator Sheldon Whitehouse (D-RI) has filed an amendment to the legislation that would address high credit card interest rates. The amendment would restore to each state its historic power to protect citizens from unscrupulous lenders based in other states. The measure, cosponsored by Senators Cochran, Merkley, Durbin, Sanders, Levin, Burris, Franken, Brown (OH), Menendez, Leahy, Webb, Casey, Wyden, Reed, Udall (NM), and Begich, is modeled after Whitehouse’s Empowering States’ Right to Protect Consumers Act (S. 255) introduced last year.
“We need to correct the historical anomaly that has allowed credit card companies to escape state law interest rate limits,” said Whitehouse. “Rhode Island and other states deserve the right to enforce interest rate limits and say enough to sky-high interest rates.”
“For too long, the State of Michigan has been unable to protect its residents from unscrupulous lending practices by out-of-state lenders,” Levin said. “This amendment would mean that out-of-state lenders would have to abide by the same rules Michigan lenders must already follow.”
“Creating a strong, level playing field in consumer protection rules is a key part of Wall Street reform,” Merkley said. “It’s absurd that credit card interest rates in one state can be set by a different state on the other side of the country. Community banks and credit unions are key to small businesses’ growth and economic development and the major credit card companies should be able to play by the same rules and rate limits as our local lenders.”
For over 200 years, each state had the ability enforce usury laws against any lender doing business with its citizens. Then, in 1978, a Supreme Court case opened up a loophole through which big national banks have been able to avoid state law interest rate caps. The Whitehouse Amendment would change the law to make clear that credit card companies and other lenders – no matter there in the country they are located – must abide by the interest rate limits of the states in which their customers reside.
###
