Sens. Sheldon Whitehouse (D-R.I.) and Elizabeth Warren (D-Mass.) introduced legislation on Wednesday that would provide consumer protections by enabling states to set interest rate limits on credit cards and other consumer credit products.
“We need to ensure states have the ability to enforce their own rules against lenders doing business within their borders,” Warren said. “States should be empowered to take action to protect consumers from tricks and traps buried in the fine print by credit card companies.”
States used to have the ability to enforce laws against any lender engaging in business with citizens, but in 1978, the Supreme Court ruled in the case of Marquette National Bank of Minneapolis v. First of Omaha Service Corp. that national banks are only required to adhere to the laws of the state in which it or the credit card subsidiary is based.
The decision ended usury protections in the U.S. and incentivized lender establishment in states with weak or non-existent consumer protection laws.
“It’s time to stop Wall Street banks and their credit card subsidiaries from taking advantage of struggling families in Rhode Island and across the nation,” Whitehouse said. “This legislation would restore historic, long-standing states’ rights to protect consumers from improperly high interest rates.”
The legislation, the Empowering States’ Rights to Protect Consumers Act, seeks to amend the Truth in Lending Act of 1968 to clarify that all consumer lenders must abide by the interest rate limits of the states in which customers reside.