Another Rate Cap Bill
U.S. Sens. Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Jack Reed (D-RI), and Jeff Merkeley (D-OR) introduced legislationthat would grant states the ability to limit consumer loan interest rates. The Empowering States’ Rights to Protect Consumers Act seeks to address the 1978 Supreme Court decision Marquette National Bank of Minneapolis v. First of Omaha Service Corporation, which ruled that a national bank is bound only by the lending laws of the state in which the bank is based.
AFSA opposes this legislation as it would drastically limit affordable financial choices and only negatively impact consumers. The Federal Reserve Bank of New York confirmed rate caps do not work and published a report focusing on three states (South Dakota, North Dakota, and Illinois) that implemented 36 percent all-in rate caps on many types of non-bank consumer loans between 2016 and 2022.One of the key conclusions of this research is that “…lending to the riskiest cohort of borrowers decreased sharply under usury limits. These borrowers were unable to find lower cost loans from banks and credit unions, as proponents of rate caps may have expected. Nor does delinquency risk for this cohort improve, implying the rate caps reduced credit access but not credit stress.”
Previous research has shown that the Illinois rate restriction decreased the number of loans to subprime borrowers by 38 percent and increased the average loan size to subprime borrowers by 35 percent.
America’s Credit Union released a statement against the bill arguing “This approach would create a fragmented lending system, increase compliance complexity, and ultimately reduce the availability of responsible, low-cost credit offered by not-for-profit credit unions”. The American Fintech Council opposed the legislation as well and stated that it would only push consumers to less transparent and more expensive alternatives. Since this legislation hasn’t received significant bipartisan support, it remains to be seen if this legislation can move forward. AFSA will continue to oppose all rate cap legislation and work with other trade associations to advocate for our industry.
February 19th, 2026
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