The Empowering States' Right to Protect Consumers Act, S. 1829, would effectively overturn a 1978 Supreme Court decision that said interest rates charged by nationally chartered banks take precedent over state-level interest rate laws. Whitehouse said that decision, in the case Marquette National Bank of Minneapolis v. First of Omaha Service Corporation, led many banks to become nationally chartered so they could impose their own interest rates across various 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," Whitehouse said.
The bill would not prescribe interest rates, but would allow states to recapture what he said was their historic powers to set interest rate policies within their boundaries. Whitehouse said the current system hurts consumers by assessing higher rates, but also hurts small local banks who are forced to follow the rules within their state but compete with nationally chartered banks.
"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," he said. "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."
Senate Majority Whip Dick Durbin (D-Ill.), who has fought against debit card fees, is a co-sponsor of the bill, as are Sens. Mark Begich (D-Alaska), Al Franken (D-Minn.), Jeff Merkley (D-Ore.), Jack Reed (D-R.I.), and Bernie Sanders (I-Vt.).