Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) on Thursday will introduce their first piece of joint legislation, proposing an interest-rate cap on credit cards and consumer loans at 15 percent.
“Today’s modern-day loan sharks are no longer lurking on street corners, threatening violence to collect their payments,” Sanders said in a statement to The Daily Beast. “They wear three-piece suits and work on Wall Street. By capping the limit of their greed and building up fair alternatives like postal banking, Congress can ensure that the American people are no longer ripped off by big banks and payday lenders.”
Dubbed the Loan Shark Prevention Act, this marks the first time the ideological counterparts are introducing a bill together. Under the proposed law, the Federal Reserve would have the authority to raise interest rates above 15 percent for a maximum of 18 months only “if the Fed determines that the national usury cap would threaten the safety and soundness of financial institutions.” The rate matches the 15-percent interest rate Congress passed in 1980 for credit unions, which has been raised to 18 percent.
“There is no justifiable reason that a person—no matter their background—should be charged an interest rate higher than 15 percent," Ocasio-Cortez said. "Rates higher than 15 percent are predatory debt traps, designed to keep working families underwater and allow predatory companies to enrich themselves off the misfortune of others.”
In their plan, the two members of Congress point to prior legal maximum rates that were instituted in a number of states before 1978, prior to the Supreme Court decision in Marquette National Bank v. First of Omaha Service Corp, which established that national banks could charge the interest rates they wanted if they moved to a state without such usury laws. Ocasio-Cortez and Sanders propose making that decision obsolete.
While there is little-to-no likelihood that the measure could pass given the current makeup of Congress, Sanders and Ocasio-Cortez point to the fact that in 1991, the Senate voted in favor of an amendment to cap credit-card interest rates at 14 percent.
The plan also includes a plank to expand affordable banking options to low-income communities via postal banking, allowing USPS to provide basic checking and savings accounts, debit cards, low-interest loans and check cashing.
“We must make sure that giant Wall Street financial institutions are not the only way Americans can gain access to banking services,” the members’ plan reads. “We can provide affordable banking options for millions of unbanked and underbanked Americans by allowing the more than 30,000 post offices in America to offer basic financial services.”