Dems Push For State Caps On Credit Card Rates

As the fight for Wall Street reform enters its final stage, Sen. Sheldon Whitehouse (D-R.I.) has introduced an amendment to let states cap credit-card interest rates. If it passes, it will close a federal loophole that has long allowed credit card companies to headquarter in states with lax rules, such as South Dakota and Delaware, and charge exorbitant interest rates.

Big banks already suffered a setback last week when Illinois Sen. Dick Durbin's bill that allows the government to oversee debit card transaction fees passed the Senate 64-33. Now the Senate's No. 2 Democrat is hoping for another win.

"Our success last Thursday is evidence that the credit card giants can be challenged and [I] hope that Senator Whitehouse enjoys that same success," said Durbin, a cosponsor of the Whitehouse amendment. "The decision of the Republicans to end their filibuster on financial regulatory reform shows that they see the writing on the wall. America is ready for this."

While major banks and credit card companies are strongly opposed, community banks don't necessarily hate the legislation. "It might be disruptive to community banks that issue cards to customers that have moved out of state or who live in nearby states. But community banks don't have programs that export high rates out of state," community bank lobbyist Steve Verdier told HuffPost.

The American Bankers Association, a top Wall Street lobby shop, doesn't share that ambivalence. "This amendment has nothing to do with the financial crisis," wrote Edward Yingling, president and CEO of the ABA, in a letter to the Senate on Monday. "It would only further burden traditional banks that had nothing to do with this crisis and are already being unfairly punished by this bill."

Whitehouse told reporters it's still unclear whether his measure has enough support to pass. That's especially true if Democratic leaders require 60 votes (instead of 50). "I think 60 makes it a tough slog," said Whitehouse.

"A lot depends on what happens in the Republican caucus," said Whitehouse, arguing that if the GOP listens to its home state constituents who are opposed to sky-high interest rates, his amendment stands a chance.

"If there are members of the [GOP] caucus who want to be in the position of voting for 30-plus percent interest rates for consumers and benefiting big banks, who don't want to uphold the historic protections for consumers by individual states... that could worry people," he said. "If that message reaches the Republican caucus, then I think we have a very, very good chance of passing this amendment. But if the banks continue to control them on this, then I don't think we have a very good chance."

So far the bill has 16 cosponsors, including one Republican, Thad Cochran of Mississippi. Whitehouse said it's likely to come up for a vote in the next several days, but is running up against a wall: A final vote on the underlying bill is set for Wednesday.

Ryan Grim contributed reporting

Comments

[elan4444]

11:48 PM on 05/19/2010

We should all write and call our representatives and strongly support this.

[gorideabike]

11:26 AM on 05/19/2010

Go to thomas.loc.gov and see if your senators have signed on to this bill. One of mine, Tom Udall has and the other one will be getting called.
The answer BTW is not lower credit rates. The answer is a living wage so we don't have to live like miners under the company store.
Check, call. Stay involved. Do not let congress assume what ever they do is fine with you.

[gorideabike]

11:49 AM on 05/19/2010

P.S.
There are only a handfull of senators really working on our behalf in financial reform. http://www.project-syndicate.org/commentary/johnson8/English
Get to know them better.

[elbzee]

08:21 AM on 05/19/2010

So, there's a perception that some banks are"already being unfairly punished by this bill." Awwww. Ain't that a frikkin shame? Cry me a frikkin river.

[Gaylord P Farqua]

07:44 AM on 05/19/2010

The agenda for the Republican caucus is to draw straws to see which GOP member will vote to object to this cap on rates. Since the entire GOP thinks with one mind it really doesn't matter who gets the short straw because the reason for blocking this legislation will be lost in a truck load of bu**sh*t.

[DebtNavigation]

07:31 AM on 05/19/2010

Prior to the Marquette decision, states could set usury caps on lending to their citizens. Marquette had nothing to do with credit cards, it was a business-to-business lending dispute involving two banks in different states with big loans at stake, but it inadvertantly allowed for states to whore out their usury caps in order to attract lenders (South Dakota's governor Janklow, a DUI manslaughterer was the first to sell his state's soul).

While it would be nice if Congress were to act to curb interest rates, an arbitrary 15% cap would no doubt put most of the U.S. back on a cash basis and be very injurious to the auto and retail industry. Allowing states to set their own usury caps would be better, but history has shown it's quite easy to pick states off one by one (I can foresee a "Uniform Usury Act") being promulgated to make states move in lockstep on the issue, just as there are so many other Uniform acts.

Judges right now have the power to manipulate the interest rates when debt cases come before them in court, but most debtors simply default on lawsuits or put in legally inadequate defenses.

[makeck]

07:50 AM on 05/19/2010

The Marquette decision, from what I can find, had EVERYTHING to do with Credit Cards. The entire affair was based upon an out of state bank offering credit cards that had a higher interest rate than was legal in the state in question (Minnesota). If this is incorrect, please provide a reference so I get the facts straight. Everything I can find is as I have written here.

[DebtNavigation]

11:07 AM on 05/21/2010

For some reason I had the bank-to-bank dispute in my brain and forgot credit cards were at the crux ... I misremember a commercial lending scenario.

[bushfocker]

03:40 AM on 05/19/2010

I have a idea, if you dont like the rate dont use the card

[TruthLives]

07:17 AM on 05/19/2010

bushfocker... you're a genius....

[RThM]

12:25 PM on 05/19/2010

Good advice. But unfortunately life isn't always that simple. If it were we'd a lot fewer teen pregnancies.

[scipio2009]

11:00 PM on 05/18/2010

This is probably going to get me flame, but I don't care. Trying to push the credit card rate regulation process to 50 seperate state regulators isn't going to work out all that well for the Democrats, so I hope this idea falls through.

There's so much that can go wrong with this stuff that it's hilarious to me that a Democrat would actually put their necks out on the line for this.

[txmom54]

11:52 PM on 05/18/2010

I think most states already have interest caps in place. I know Texas caps at 18% but the banks have been able to get around that thru the interstate commerce loophole. Massachusetts moved their money from BoA last month to protest rates higher than the 18% their state allowed. Closing the loophole should simply reinstate the powers states once had.

[ForeignAffairs]

01:54 AM on 05/19/2010

Per my understanding, the Whitehouse amendment would give states the right to control credit card interest rates -- but I don't think it prescribes any specific APR -- so it could probably also empower states to allow banks to RAISE interest rates.

Senator Sanders' S.582 is much tougher than the Whitehouse amendment. It sets a specific 15% cap on interest rates nationwide. But everyone will have to demand it, or it will never happen.

[scipio2009]

05:52 PM on 05/19/2010

Texas is at 18% with a float. Massachusetts moved their money from BoA, but do you know where they moved their money to?

This may be a buzzkill, but I honestly don't think the Big 4 of US banks, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are going to be muscled by any states other than possibly New York, California, Texas, and Florida, and that's only because those state are so large. And having none of the possible candidate in those 4 races being openly hostile to banks makes that even less a possibility.

If the showdown to bank-crusading state saying that they want to impose strict and "un-workaroundable" caps and the Big 4 banks threatening not to operate in those states under those terms, the banks are going to win. Now, I'm not saying that a rate cap is now impossible to have; as you've already said, most states have some sort of interest rate cap in place. All I'm saying is expecting that every state will arbitrarily set tough, riduculously low caps or that any state will push the 15% cap that Sanders wants to push, is an expectations that will never be met

[-swift]

09:53 AM on 05/19/2010

Since this is about an individual state's right to regulate commerce, I'm shocked to find the Republicans are not on board. Don't they like states' rights?

[scipio2009]

05:40 PM on 05/19/2010

lol, are you trying to imply that I'm a Republican? That's a first.

Frankly, when you actually sit back and conceptualize the nonsense notion that is in the primary underlying legislation, I honestly don't see why any Democrat would tie their name to such a mechanism. In essence, the Whitehouse legislation is calling for allowing each individual state to set their own rates, and then making the state statute override the federal rule. 50 different state regulators would figure out the rate caps for their own states.

Still, what the Whitehouse legislation completely misses is the very real possibility that, instead of tightening caps, states might decide open up their rate caps even more. Outside of CA, FL, NY, and TX, no other state really holds the population advantage to dictate terms the large banks, and in the push to ensure that the large banks continue to operate in the other 45 states, most folks would seem to be in the position to be compelled to lower their thresholds.

In addition, Republicans have proven that they would like nothing more than to lower any kind of regulations for industry, and following through with the Whitehouse plan would give anoither 20-30 Republican governors the chance to continue that.

It's just a mistake waiting to blow up in the face of any Democrat looking to champion it.

[BikeFreak]

10:00 PM on 05/18/2010

I would like credit card companies to have limits on interest rates they can charge. However, I won't hold my breath. I will believe it if it happens.

Therefore, I own no credit cards. I simply refuse to play this game with these credit card companies. If I cannot pay for something with the money I have, I just go without and try to save for it.

[budanatr]

08:40 PM on 05/18/2010

Yeahhhhhhhhhhhhhhhhhhhhhh! Make it happen!!!!!!!

[kinogod]

08:36 PM on 05/18/2010

Bring it! Cue Bowie: Ch Ch Ch Change!

[lodger16x]

08:16 PM on 05/18/2010

Nationalize the credit industry. In a way, it's already happened with the Bush/Obama Wall St bailouts. Obama has refused to insist on the American people getting any real control over these institutions, despite the fact that unregulated free market capitalism was a FAIL! Obama has not opened his mouth to call out DEMs who voted against breaking up big banks. The fix is in- most DEMs and all REPUBS are shameless corporatists.

[Kassandra]

07:12 PM on 05/18/2010

Why didn't the Dems do it in the first bill? to give the CC's a little more time to get us out of our homes?
Now, they're turning "populist" in time for Nov. Game changer indeed...why not just call it a game?

[BikeFreak]

09:56 PM on 05/18/2010

I agree.

Sometimes I cannot tell this administration from the last.

[Rudym]

06:50 PM on 05/18/2010

Credit Card Companies

Quit taking advantage of your fellow citizens. We all know your game. Knowingly give credit to people with poor credit ratings.. You know they will overspend their control limits. Then make the peiole with good credit pay for the costs for credit card defalulters by charghing everybody higher interest rates. Then, In the meantime, make the poor saps your slaves to payments until they default.

Bring back the 12 percent maximum usury laws and stop making people slaves..

[ForeignAffairs]

07:27 PM on 05/18/2010

Exactly.

Senator Bernie Sanders' S.582 would cap consumer APR at 15% across all states. It's much stronger than the Whitehouse bill. But that won't happen unless everyone demands it.

[StopThePlanet]

07:58 PM on 05/18/2010

They aren't just taking advantage of those with poor credit. Changing payment cycles to cause those who normally pay on time to miss payments just so they can manipulate customers into paying higher interest. Also, adding late fees to the monthly bill.

[Cheryl2]

11:27 AM on 05/19/2010

They can change your interest rate anytime they want and do not need a reason. Just ask Chase, they bumped me from 12% to 22% to 30% with no overages, no late payments, nothing. Asked them why and they said "because we can". Beware. We no longer use credit.

[parlimentMike]

06:32 PM on 05/18/2010

One might imagine that the Democrats want credit for advocating an action they refuse to take themselves, if one were cynical.

[jnw147]

05:51 PM on 05/18/2010

This measure is long overdue. How much you want to bet that the Republicans will do everything in their power to block it. When will the American people start saying "NO" to the Republicans. We will the American people wake up?

[Kassandra]

07:14 PM on 05/18/2010

Well, that'll be the story we're fed anyway. So, WHY did we give them supermajorities again?