Sen. Elizabeth Warren, D-MA, is pushing legislation to let states limit credit card interest rates – and enlisting JPMorgan Chase CEO Jamie Dimon to help.
Warren wrote to Dimon on Tuesday, urging his support for the bill backed by Senate Democrats, after his jest last month about such a rate cap. Dimon had joked during a question-and-answer session at the World Economic Forum in Davos, Switzerland, that a 10% rate cap should be tested in two states, Massachusetts and Vermont, to demonstrate the harmful consumer effects arising from such caps.
Last month, Warren and three other Senate Democrats – Sheldon Whitehouse and Jack Reed of Rhode Island and Oregon’s Jeff Merkley – introduced the Empowering States’ Rights to Protect Consumers Act.
The measure would give states the authority to impose lending restrictions on national banks such as JPMorgan Chase, the biggest U.S. bank, and Capital One by letting states enforce usury laws against any lender doing business in that state.
“Last month, while attending a billionaire wellness retreat at a Swiss ski resort, you came up with a ‘great idea’ involving credit card debt,” Warren wrote. “If you indeed support this policy, I encourage you to publicly call on Congress to pass this legislation to make your self-described ‘great idea’ a reality.”
During the Davos gathering, Dimon had said a 10% rate experiment would teach many people “a real lesson,” CNN reported. In reality, a rate freeze would be “an economic disaster” in terms of people losing access to credit, he predicted.
A JPMorgan Chase spokesperson didn’t respond to a request for comment.
Americans carry about $1.2 trillion in credit card balances with an average interest rate above 20%, with “rates around 30% for consumers with low credit scores,” Warren wrote, citing Federal Reserve data.
Also weighing in on credit card interest rates, President Donald Trump called for a one-year cap of 10% on credit card interest rates last month. The industry ignored that request. Trump renewed the call for a rate cap during his own appearance at the Davos event.
The bill would amend the Truth in Lending Act “to clarify that consumer lenders — regardless of their location or legal structure — must abide by the interest rate limits of the states in which their customers reside,” Warren told Dimon.
The bill “would restore the pre-Marquette powers of each state to protect its citizens with interest rate limits on national bank lending done within the state,” the senators said in a Jan. 30 press release, referring to a 1978 Supreme Court case.
“If enacted, Massachusetts, Vermont and other states would be able to impose interest rate limits, such as a 10% credit card interest rate cap, on banks like JPMorgan Chase,” Warren wrote in her letter.
In 1978, the Supreme Court ruled unanimously in Marquette National Bank of Minneapolis vs. First National Bank of Omaha that a national bank is bound only by the lending laws of the state in which it’s based. The case turned on whether Minnesota could impose an interest rate on a bank based in Nebraska, which allowed a higher rate.
Whitehouse has introduced the bill in each Congress since 2009, according to the Senate Banking Committee. Warren, that panel’s ranking member, has been a co-sponsor of the legislation several times.
Last week, the American Fintech Council wrote to Warren and Sen. Tim Scott, R-SC, chairman of the Senate Banking Committee, opposing the bill. The AFC’s membership includes numerous banks.
The legislation “would create a state-by-state usury regime that would reduce credit availability to American consumers, increase compliance complexity for responsible providers, and undermine the durable national framework that supports responsible bank-fintech partnerships,” wrote Ian P. Moloney, the trade group’s chief policy officer.
Separately, the AFC on Thursday issued its public support for a West Virginia Senate bill that would increase the state’s consumer credit interest rate cap from 31% to 36%.
Warren asked Dimon to respond by March 3 to “please confirm your support for this legislation.” She added: “I also encourage you to persuade your close allies in Congress to support it.”
A separate Senate bill last year from Sens. Bernie Sanders, I-VT, and Josh Hawley, R-MO, would impose a 10% interest rate freeze on credit card interest until 2031. A companion measure was introduced in the House last year.