One of the roughly 140 proposed amendments to the financial reform legislation could have serious implications for credit card issuers, but so far the proposal does not seem to have much of a toehold.
Sen. Sheldon Whitehouse, D-R.I., introduced an amendment last week that would effectively override a landmark 1978 Supreme Court decision.
In Marquette National Bank of Minneapolis v. First Omaha Service Corp., the court ruled that lenders must comply with the usury rules in the states where the companies are based, not where their customers are located. As a result, many lenders reorganized as national banks and incorporated their businesses in states such as Delaware and South Dakota that had fairly loose restrictions.
Sen. Whitehouse has said his amendment does not seek to recommend interest rate caps. "It would merely restore to each state the ability to protect its citizens from lenders based in other states," according to an explanation released by his office.
The amendment's 11 co-sponsors include Democratic Sens. Jeff Merkley of Oregon, Dick Durbin of Illinois, Al Franken of Minnesota and Sherrod Brown of Ohio. "I don't think it's being supported by the White House that has a capital 'h' in it, because if this amendment were to be enacted it would be a disaster for the U.S. economy," said Jeff Naimon, a partner BuckleySandler LLP.