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A bill that would allow individual states to set limits broadly aligns with rhetoric from President Trump on a 10 percent cap on interest rates, but industry participants have warned that such a change could drive consumers to unregulated alternatives.
The Empowering States’ Rights to Protect Consumers Act, introduced by Senators Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Jack Reed (D-RI) and Jeff Merkley (D-OR) in January 2026, would allow individual states to limit interest rates on consumer loans.
In a statement, Senator Whitehouse said it would help address the $1.23trn Americans hold in credit card debt.
In the same statement, Senator Warren said “astronomically high” interest rates of 25, 30, even 35 percent were being charged.
Supporters of the bill said that it would restore the powers of each state to protect its citizens with interest rate limits on national banks lending within the state.
From the founding of the US, each state had the power to enforce usury laws against any lender doing business with its citizens. That changed with a Supreme Court decision in 1978 that ruled a national bank is only bound by the lending laws of the state it is based in.
In a social media post at the start of 2026, US President Donald Trump had said a 10 percent cap on credit card fees would be introduced from January 20. The date passed without any change to the existing laws, with Senator Warren noting that such a cap would require Congress’ approval.
For compliance departments, the challenge would be the end of uniform requirements nationally. The switch from a single country-wide standard to a 50-state patchwork would require a complete overhaul of automated billing systems and legal disclosure frameworks.
In addition, artificial intelligence tools would need to be recalibrated: a risk model trained on 25 percent rate data would need updating to operate under a 10 percent cap.
Opposition to the proposals
Although the movement to cap credit card interest rates has had support from across the US political spectrum, the national banking sector has run an extensive lobbying campaign against it.
The Independent Community Bankers of America (ICBA) staunchly opposes the proposals, highlighting the compliance, legal and IT costs of managing potentially widely varying individual state legal and regulatory models.
It also said that caps are a form of price control that would hurt marginal customers that the banks decided were no longer profitable enough to service. The ICBA also said many of its members are not large enough to use their other divisions to absorb potential losses from lending activities.
The ICBA united with other groups representing US financial institutions, including the American Bankers Association and America’s Credit Unions, to criticise both the act and President Trump’s call for a 10 percent cap.
The American Fintech Council, which represents fintech companies and “innovative partner banks” warned that the bill would “reduce access to responsible and affordable credit for millions of Americans, disrupt consumer credit markets, and increase compliance complexity for responsible providers”.
Separately, influential JPMorgan Chase CEO Jamie Dimon told the World Economic Forum (WEF) in Davos that a rate freeze would be “an economic disaster” in terms of people losing access to credit.
The benefits for alternative providers
If the act became law, US consumers at the margins of their lenders’ profitability risk indices would almost certainly find it much harder to use their credit cards under the same agreements they currently use.
If that were to happen, there could be a big shift to other payment methods. For example, debit card providers could benefit, as would the owners of relevant infrastructure.
Visa and Mastercard could see their transaction volumes increase if US consumers become more dependent on debit cards; however, the higher margins for credit transactions could mean that overall revenues actually fall.
A cap could also reduce the ‘debt spiral’ effect, whereby consumers become less and less able to pay off the principal of a debt because they have to focus on servicing interest payments.
In the long-term, this might create a more sustainable repayment culture, which would benefit the sector overall. On the other hand, these so-called ‘subprime’ consumers might find their access to credit curtailed, which in turn might drive them to fringe providers like buy now, pay later (BNPL) services and payday loans programmes.
That would almost inevitably lead to a backlash from consumer rights advocates concerned about rising numbers of vulnerable people being caught up in loosely or completely unregulated arrangements because they were deemed to be subprime by mainstream lenders.
“High-cost credit doesn’t help people get ahead. It pulls struggling borrowers into debt traps they may not be able to escape”, said Adam Rust, director of financial services for the Consumer Federation of America.
Sharp falls in interest rate revenues would impact the fringe offerings to consumers as banks dealt with lower profit margins. This would affect reward programmes such as points and airmiles that are currently funded by high margins on interest fees. Annual fees for cards could also once again be the norm.
If consumers move to alternative services that are less strictly regulated than banks, it creates a supervisory gap, with regulators less able to identify consumer harm because lending has moved off the balance sheets of traditional institutions.
The legislation currently sits in the Senate Committee on Banking, Housing and Urban Affairs, of which Senator Warren is a member, without a clear way forward, reflecting the polarised opinions surrounding it.
It seems unlikely to progress in the near future, but compliance professionals should monitor developments and consider the steps they would need to take to align their processes with the imposition of a cap.
