[Congressional Record Volume 157, Number 170 (Tuesday, November 8, 2011)]
[Senate]
[Pages S7193-S7194]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WHITEHOUSE (for himself, Mr. Levin, Mr. Begich, Mr. 
        Franken, Mr. Reed, Mr. Durbin, Mr. Sanders. and Mr. Merkley):
  S. 1829. A bill to amend the Truth in Lending Act to empower the 
States to set the maximum annual percentage rates applicable to 
consumer credit transactions, and for other purposes; to the Committee 
on Banking, Housing, and Urban Affairs.
  Mr. WHITEHOUSE. Mr. President, I was here last week in this Chamber 
to discuss a variety of areas in which the American people are not 
getting a straight deal compared to special interests and folks who 
have a lot of power for themselves and their industries in Washington. 
In that speech I proposed a number of concrete steps we could take to 
help restore the balance of power in our Nation between ordinary 
Americans on the one hand and the giant corporations and special 
interests that give themselves special deals and privileges that the 
American people do not share on the other hand.
  Today I am here to introduce legislation to take one of those steps; 
that is, to protect ordinary consumers from runaway interest rates on 
credit cards from Wall Street banks. This is something that has gone 
unchecked for far too long. In the last Congress we passed two pieces 
of banking legislation. We passed the Credit Card Act, which ended some 
of the worst tricks and traps hidden in credit card contracts, and we 
passed the Dodd-Frank Act, which restructured our system of financial 
regulation and created a new agency to protect consumers from hazardous 
mortgages and credit cards.
  Regrettably, one particularly bad practice was not addressed in 
either of those two pieces of legislation: the runaway credit card 
interest rates with which families are too often burdened. I will add 
it is not just families. I went through Olneyville in Providence about 
2 weeks ago and spoke to a small business owner who was having tough 
times. His bank had pulled his line of credit, so he was having to fund 
his business off his credit card, and they had bumped up his credit 
card rate to--you guessed it--30 percent.
  The Empowering States' Right to Protect Consumers Act, which I am 
introducing today, would pick up where the Credit Card Act and Dodd-
Frank left off by restoring to our 50 sovereign States the power which 
they have properly had through the vast bulk of the history of this 
Republic to protect their home State consumers with limits on credit 
card and other loan interest rates. This is not a new power to States. 
This is not a new principle or idea. This is the restoration of a 
historic States right which was just eliminated a few decades ago.
  When you and I were growing up, a credit card offer with a 20-percent 
or 30-percent interest rate might be something to bring to the 
attention of law enforcement. Such interest rates were illegal under 
most State laws. Today, in contrast, credit card companies routinely 
charge rates of 30 percent or more. We may not know, going through our 
credit card agreement, that is where we are going to end up. They may 
have a teaser rate up front that is a lower rate. But make one of those 
mistakes in that 20-page-long contract that is full of tricks and 
traps, and, pow, there we are at 30 percent.
  What happened between our childhood when a 30-percent interest rate 
was something to bring to the attention of law enforcement, and now, 
when ordinary families are bedeviled

[[Page S7194]]

with 30 percent interest rates on their credit cards? Before 1978--
which is for the first 202 years of the American Republic--each State 
had the ability to enforce usury laws, interest rate limits to protect 
their citizens. Our economy grew and flourished during those two 
centuries, and lenders profited while complying with the laws in effect 
where they operated.
  Then came 1978 and a seemingly uneventful Supreme Court case. It was 
little noticed at the time. It was decided in Marquette National Bank 
of Minneapolis v. First of Omaha Service Corporation. The Supreme Court 
had to decide what State's law to apply when the bank was domiciled in 
one State but the customer lived in a different State.
  The Court looked at the word ``located'' in the National Bank Act of 
1863, and it decided it meant the location of the bank and not the 
location of the customer. They did not get it right away, but it did 
not take long before some big banks spotted the opportunity. They could 
avoid interest rate restrictions by reorganizing as national banks and 
moving to States that had weak interest rate protections and 
comparatively weak consumer protections. The proverbial race to the 
bottom followed as a small handful of States eliminated interest rate 
caps and degraded consumer protection in order to attract lucrative 
credit card business and related tax revenue to their States.
  That is why the credit card divisions of major banks are based in 
just a few States and why consumers in other States are often denied 
protection from outrageous interest rates and fees, even though those 
outrageous interest rates and fees are against the law of the 
consumer's home State.
  My bill would reinstate the historic longstanding powers of States to 
set interest rate caps that protect their own citizens.
  Let me be clear about what this bill would not do. It would not 
prescribe or recommend any interest rate caps nor would it impose any 
other lending limitations. It is pure States rights. It would restore 
to the States the power they enjoyed for over 200 years from the 
founding of the Republic: the power to say enough, the power to say 
that 30 percent or 50 percent or whatever the State deems appropriate 
should be the limit on interest charged to their people.
  The current system is not only unfair to consumers, it is unfair to 
our local lenders and retailers who continue to be bound by the laws of 
the State in which they are located. This is a special privilege for 
big national banks that can move their offices to whatever State will 
give them the best deal in terms of lousy consumer protection and 
unlimited interest rates. A small local lender has to play by the rules 
of fair interest rates. Gigantic credit card companies can avoid having 
any rules at all. We need to level the playing field to eliminate this 
unfair and lucrative advantage for Wall Street banks against our local 
credit unions and other small lenders.

  When we pass this bill, States can dust off or reenact their usury 
statutes--most of which still limit interest rates to 18 percent or 
less--and once again begin protecting their consumers from excessive 
interest rates. This is the historic norm in our constitutional 
Republic. It is the 30-percent and over interest rates that are the 
recent anomaly that are the historic peculiarity. We should go back to 
the historic States rights norm, the way the Founding Fathers saw 
things under the doctrine of federalism and close this modern 
bureaucratic loophole that allows big Wall Street banks a special deal 
to gouge our constituents.
  As I close, I thank Senators Levin, Durbin, Begich, Franken, Reed of 
Rhode Island--most significantly my senior Senator--Sanders, and 
Merkley for their cosponsorship of this bill. In the past, similar 
legislation has garnered bipartisan support. It did so as an amendment 
to Dodd-Frank, and I hope my Republican colleagues will consider giving 
this bill a close look and join with us. This is purely an issue of 
restoring the balance of power to the States and to the people of those 
States as voters--federalism, something I know many Republicans support 
in other contexts.
  I ask all of my colleagues for their consideration and support.

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