Until 1978, every state had the ability to enforce interest rate caps on any lender doing business with its citizens. That year, a Supreme Court case opened a loophole through which big national banks have been able to avoid state interest rate caps. Senator Bernie Sanders has long fought to curb exorbitant interest rates, and he is a cosponsor of an amendment that would allow states to again enforce their own usury laws. At a Capitol Hill press conference on Wednesday, Sanders said that’s something the American people want. “They’re sick and tired of being ripped off by banks that they helped bail out and are now forcing them to pay 25, 30, 35 percent interest rates on their credit cards.”
In the 1978 Supreme Court case, Marquette National Bank of Minneapolis v. First of Omaha Service Corporation, the court said that it was the intent of Congress that states not be able to regulate nationally-chartered banks located in other states. This has resulted in many credit card issuers basing themselves in states that allow high interest rates, namely Delaware and South Dakota.
“We need to correct the historical anomaly that has allowed credit card companies to escape state law interest rate limits,” Senator Sheldon Whitehouse said of his amendment to Wall Street reform legislation that the Senate is considering. The amendment has the support from more than 200 national and state organizations including the AARP, Consumer Federation of America, Consumers Union, National Consumer Law Center (on behalf of its low-income clients), and Public Citizen.
To watch the press conference with Senators Sanders, Whitehouse and Sherrod Brown, click here.