A group of U.S. senators on Wednesday introduced legislation that would allow states to cap credit card interest rates, which they say are riding at “extortion” rates for some consumers.
Sen. Sheldon Whitehouse, D-R.I., along with six other Senate Democrats including Sen. Dick Durbin, D-Ill., is leading the effort to pass the “Empowering States’ Right to Protect Consumers Act,” which would overturn a 1978 Supreme Court decision that allows nationally chartered banks’ interest rates to take precedent over states’ interest-rate laws.
“Today, more than a quarter of all credit cardholders in this country are paying interest rates above 20% and as high as 59%,” Sen. Bernard Sanders, I-Vt., said in a press release. “When credit card companies charge 25% or 30% interest rates, they are not engaged in the business of ‘making credit available’ to their customers. They are involved in extortion and loan-sharking.”
Whitehouse first introduced the bill in 2009 and offered it as an amendment to the Dodd-Frank Act.
In a Nov. 9 note to investors, analysts at New York-based equity firm Keefe, Bruyette & Woods suggested a bill to cap credit card interest rates might face obstacles.
The same proposal did not advance in May 2010, the analysts noted. Since then, “the political climate has changed” with more Republicans in Congress, so the likelihood of such a bill passing would be “quite low,” the firm concluded.
