A month before President Donald Trump renewed his calls last week to take on Americans’ crushing consumer debt by capping credit card interest rates, his administration quietly intervened in a legal battle to do the opposite.
In December, Trump’s Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC), which oversee the nation’s financial regulations, filed legal briefs in a case opposing a new Colorado state law that would rein in soaring interest rates on financial products, including credit cards.
Colorado’s effort shares similar aims as a 10 percent credit card interest rate cap that Trump has repeatedly claimed he wants to implement at the federal level, a policy championed by progressive lawmakers such as Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-VT), and Rep. Alexandria Ocasio-Cortez (D-NY).
In recent years, credit card interest rates — charged on outstanding balances that customers haven’t fully paid off each month — have increased to an average of 24 percent, becoming one of the most significant expenses for households and costing consumers an estimated $120 billion every year. Credit card debt has reached a record high for Americans, potentially dampening consumer spending among other economic downsides.
For years, financial lenders have been pushing those rates higher by exploiting a loophole called “rent-a-bank.” This scheme allows financial institutions to circumvent state-level rate-capping laws by applying light-touch regulations from their home states to other locales where they do business.
A 1978 US Supreme Court ruling legalized the practice, but Congress subsequently created a pathway for states to opt out of this system and enforce their own usury laws. A handful of states and US territories, such as Iowa and Puerto Rico, have since cracked down on these rent-a-bank schemes, with Colorado becoming the latest to do so in 2023. Oregon is currently
Auteur: Luke Goldstein
