Seth Goldstein
Staff Editor, Delaware Journal of Corporate Law, Volume 50
Introduction
In recent years, the idea of capping credit card interest rates has transitioned from a niche policy proposal to a mainstream debate, gaining surprising bipartisan momentum. With figures like Senator Bernie Sanders and Senator Josh Hawley aligning on a proposed 10% cap—echoing a campaign promise by President Donald Trump—the issue has captured national attention. This blog post examines the legal landscape shaped by Supreme Court precedents, explores Delaware’s interest in this matter, and analyzes the arguments for and against capping credit card interest rates. The blog further explains how these rates differ from other forms of interest and explores the potential corporate impact if Congress enacts even a temporary cap.
Recent Traction and Bipartisan Support
The push to cap credit card interest rates comes amid growing consumer frustration with rising debt burdens. In 2024, Americans held $1.17 trillion in credit card debt, paying over $130 billion in interest and fees in 2022 alone.[1] The average interest rate on credit card debt currently hovers at 20.09%,[2] with some borrowers facing rates as high as 35%.[3] Against this backdrop, Senators Hawley and Sanders have found common ground, with Sanders announcing plans to introduce legislation supporting President Trump’s 10% cap proposal as credit card defaults reach their highest levels since 2008.[4] This bipartisan alliance—bridging a self-proclaimed “democratic socialist” and a conservative Republican—underscores this issue’s broad appeal as a response to economic pressures facing American households.[5]
The Legal Landscape: Supreme Court Precedent
While the Supreme Court has not directly ruled on a federal cap on credit card interest rates, its decisions have significantly shaped the regulatory framework. In Marquette Nat’l Bank of Minneapolis v. First of Omaha Service Corp., the Court held that national banks could charge interest rates based on their home state’s laws, not the borrower’s state, under the National Bank Act (“NBA”).[6] This allowed banks to “export” rates from states with lax usury laws, such as Delaware and South Dakota, fueling higher nationwide rates.[7] In Smiley v. Citibank, expanding on Marquette, the Court interpreted “interest” under the NBA to include late fees and other charges, shielding banks from state limitations and reinforcing federal preemption.[8] Additionally, in Beneficial Nat’l Bank v. Anderson, the Court ruled that state usury claims against national banks are preempted by the NBA, establishing federal law as the exclusive avenue for such challenges and limiting consumer recourse.[9]
Other cases, like Cuomo v. Clearing House Ass’n, have tested the boundaries of federal preemption,[10] while Madden v. Midland Funding, LLC, though not a Supreme Court ruling, suggested that non-bank loan buyers might face state usury laws, a decision the Court declined to review.[11] These cases collectively highlight the tension between federal authority and state regulation, a dynamic that any federal cap would need to navigate.
Delaware Perspective
Delaware’s business-friendly laws have made it a hub for credit card issuers, amplifying its relevance to this debate.[12] In Deposit Guar. Nat’l Bank. v. Roper, the Supreme Court addressed a procedural issue in a case where cardholders challenged a bank’s finance charges as usurious under state law.[13] Although this case focused on class certification, it underscored the difficulties consumers face in contesting rates in states like Delaware, where permissive usury laws attract financial institutions.[14] Therefore, a federal cap would likely directly impact Delaware’s corporate ecosystem, potentially disrupting the state’s role as a financial powerhouse.
Arguments For and Against Capping Credit Card Interest Rates
The debate over capping credit card rates reflects a rare bipartisan convergence, driven by consumer debt concerns and economic equity.[15] Supreme Court precedents like Marquette and Smiley have enabled high rates, while Delaware’s role as a financial hub, exemplified in cases like Roper, underscores the stakes at issue.
Advocates for capping credit card interest rates emphasize consumer protection, noting that high rates disproportionately burden low-income and high-risk borrowers, trapping them in debt cycles.[16] A cap could break this cycle, offering immediate relief to vulnerable populations.[17] Economically, reducing rates from 21.5% to 10% could cut monthly interest payments from $116 to $54 on a $6,500 balance, shortening repayment periods and saving consumers billions.[18] Proponents also argue that current rates exploit consumers, and a cap would promote equitable access to credit.[19]
On the other hand, critics contend that a 10% cap could make lending to riskier borrowers unprofitable, reducing credit access for low-income individuals.[20] They warn of market disruption, suggesting that caps could lead to higher fees, lower credit limits, or a shift to riskier alternatives like payday loans which offset consumer benefits.[21] Furthermore, opponents argue that a cap might stifle industry innovation and disadvantage smaller lenders, consolidating market power among large banks.[22]
Why Credit Card Interest Rates Differ
Credit card interest rates exceed those of mortgages or auto loans due to distinct characteristics.[23] As unsecured debt without collateral, lenders face higher default risks, justifying elevated rates.[24] The revolving nature of credit allows borrowers to carry balances indefinitely, increasing long-term risk compared to fixed-term loans.[25] Additionally, features like rewards programs and instant access are partly funded by interest and fees, contributing to the higher rates.[26]
Corporate Implications of a Congressional Cap
If Congress enacts even a temporary cap, the corporate world—particularly in Delaware—would feel significant reverberations. A 10% cap could slash bank profits, given the 20% average APR, prompting issuers to tighten credit standards or raise fees to compensate.[27] Banks could argue that a cap violates the NBA or interstate commerce principles, sparking litigation.[28] Moreover, reduced lending or competition could reshape the credit industry, potentially affecting Delaware’s financial sector.[29] However, any law passed by Congress may not apply retroactively to existing debt,[30] and it is currently unlikely that the 119th Congress will pass any bill on this matter.[31]
Conclusion
As Congress debates capping credit card interest rates, it grapples with a tough challenge: easing consumer debt burdens while preserving credit access and market stability. Any legislative move could unleash far-reaching effects, reshaping corporate strategies, transforming consumer finance across the nation, and potentially altering Delaware’s pivotal role as a financial hub. With the conversation evolving and bipartisan support highlighting the urgency, the outcome of this decision promises to leave a lasting mark on America’s credit landscape.
About the Author
Seth is a third-year law student at Widener University Delaware School of Law and is a Staff Editor for Volume 50 of the Delaware Journal of Corporate Law. He graduated from Towson University in 2021, earning his bachelor’s degree with a major in Business Administration. While in law school,Seth currently works at McCauley Law Offices, P.C. in Chadds Ford, Pennsylvania as a Law Clerk. Upon graduation, he will become an associate attorney at McCauley Law and work in their New Jersey office, focusing on tax controversy.
[1] Allison Schrager, Capping Credit Card Rates Won’t Help Consumers, City J. (Jan. 14, 2025), https://www.city-journal.org/article/donald-trump-bernie-sanders-cap-credit-card-interest-rates.
[2] Ted Rossman, Current Credit Card Interest Rates, Bankrate (Mar. 27, 2025), https://www.bankrate.com/credit-cards/advice/current-interest-rates/.
[3] Patrick Cooley, Trump Interest Rate Cap Draws Criticism, Payments Dive (Sept. 30, 2024), https://www.paymentsdive.com/news/trump-interest-rate-proposal-credit-cards-draws-criticism/728409/#:~:text=The%20average%20interest%20rate%20for,the%20rewards%20for%20everyone%20else.
[4] Kaustubh Bagalkote, Bernie Sanders Calls Trump’s 10% Interest Rate Cap on Credit Card Debt a ‘Great Idea’ as Defaults Surge to Highest Levels Since 2008, Benzinga (Dec. 31, 2024, 4:49 AM), https://www.benzinga.com/markets/equities/24/12/42737402/bernie-sanders-supports-trumps-credit-card-interest-rate-cap-at-10-amid-highest-defaults-since-2008-visa-and-mastercard-trade-in-the-red.
[5] See Schrager, supra note 1.
[6] Marquette Nat’l Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299, 317–19 (1978).
[7] See id. at 318.
[8] Smiley v. Citibank, N.A., 517 U.S. 735, 740, 747 (1996).
[9] Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 10–11 (2003).
[10] See generally Cuomo v. Clearing House Ass’n, 557 U.S. 519, 524–36 (2009) (holding that the National Bank Act preempts state supervisory powers over national banks but not state enforcement of non-preempted laws through judicial enforcement actions).
[11] See Madden v. Midland Funding, LLC, 786 F.3d 246, 250–51 (2d Cir. 2015).
[12] See Claire Tsosie, Why So Many Credit Cards Are from Delaware, Nerdwallet (Apr. 17, 2017, 7:17 AM), https://www.nerdwallet.com/article/credit-cards/why-so-many-of-your-credit-cards-come-from-delaware.
[13] Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 328 (1980).
[14] See id. at 340; see also Tsosie, supra note 12.
[15] See Schrager, supra note 1; Polo Rocha, Two Senators Want to Cap Credit-Card Rates at 10%. Banks Say That Would Cut Credit Access, Investopedia (Feb. 11, 2025, 1:00 PM), https://www.investopedia.com/senators-want-to-cap-credit-card-rates-banks-say-that-would-cut-credit-access-8789598.
[16] Elisabeth Buchwald, Americans Are Drowning in Credit Card Debt. Trump’s Proposed Cap on Interest Rates Probably Won’t Help, CNN (Sept. 24, 2024, 5:30 AM), https://www.cnn.com/2024/09/24/business/trump-credit-card-cap/index.html.
[17] Id.
[18] See id.
[19] See Rocha, supra note 15.
[20] Cooley, supra note 3; Art Carden, Should We Cap Credit Card Interest Rates at 15%?, Forbes (May 10, 2019, 11:00 AM), https://www.forbes.com/sites/artcarden/2019/05/10/should-we-cap-credit-card-interest-rates-at-15/.
[21] Tom Nawrocki, The Folly of Capping Credit Card Interest Rates, Payments J. (Oct. 4, 2024), https://www.paymentsjournal.com/the-folly-of-capping-credit-card-interest-rates/.
[22] Id.
[23] Gregory Karp, Why Are Credit Card Interest Rate So High?, Nerdwallet (June 22, 2023, 12:24 PM), https://www.nerdwallet.com/article/credit-cards/credit-card-interest-rates-high (“It’s about risk to the lender).
[24] Karl E. Schneider & Andrew P. Scott, Interest Rate Caps on Credit Cards, Cong. Rsch. Serv. (Dec. 26, 2024), https://www.congress.gov/crs-product/IF12861#:~:text=Consequences%20of%20Usury%20Caps%20on%20Credit%20Cards,of%20less%20creditworthy%20borrowers%20being%20denied%20credit.
[25] Id.
[26] See Cooley, supra note 3; Karp, supra note 23.
[27] Schrager, supra note 1.
[28] Schneider & Scott, supra note 24.
[29] See Nawrocki, supra note 21.
[30] Stephanie Dhue, A New Bill Would Cap Credit Card Interest Rates at 10%. Here’s What That Means for Your Money, CNBC (Feb. 7, 2025, 2:42 PM), https://www.cnbc.com/2025/02/07/bill-would-cap-credit-card-interest-rates-at-10percent-what-it-means-for-you.html.
[31] Rocha, supra note 14 (“The likelihood of the bill passing is ‘very, very small . . .’”).
Leave a Reply