10 Percent Credit Card Interest Rate Cap Act

Bill Summary: 10 Percent Credit Card Interest Rate Cap Act (S. 381)

Overview

The 10 Percent Credit Card Interest Rate Cap Act is a legislative proposal designed to significantly lower the cost of consumer credit by imposing a federal ceiling on the interest rates that credit card companies can charge. The bill seeks to protect consumers from high-interest debt by amending the Truth in Lending Act.

Key Provisions

1. Interest Rate Ceiling

The core of the bill establishes a strict cap on the Annual Percentage Rate (APR) for credit card accounts.
* Maximum Rate: The APR, including all finance charges, may not exceed 10 percentage points.
* Anti-Evasion Measure: To prevent lenders from bypassing the cap by rebranding interest as "fees," the bill stipulates that any fees not classified as finance charges cannot be used to evade the 10% limit. Furthermore, the total sum of such fees cannot exceed the total amount of finance charges assessed.

2. Penalties and Enforcement

The bill introduces rigorous penalties for creditors who knowingly exceed the 10% cap:
* Forfeiture: Violating the cap is considered a violation of the Truth in Lending Act, resulting in the forfeiture of the entire interest associated with that obligation.
* Consumer Recovery: Consumers (or their legal representatives) who have paid interest or fees exceeding the cap may file a legal action to recover the full amount of those charges. This action must be brought within two years of the last usurious collection.
* Regulatory Oversight: Creditors in violation are subject to the enforcement provisions of section 130 of the Truth in Lending Act.

3. State Law Integration

The bill explicitly states that it does not preempt state laws. If a state has laws providing greater consumer protection (e.g., a lower interest rate cap) than the federal 10% limit, the state law will prevail.

Impact and Affected Parties

• Consumers: Credit card users would see a significant reduction in interest costs, potentially reducing the long-term burden of debt and making it easier to pay off balances.
• Financial Institutions: Credit card issuers and lenders would be forced to restructure their pricing models. The bill's restrictive cap on fees and interest would likely reduce the profit margins of credit card providers.
• Legal System: The bill creates a new pathway for consumers to sue lenders for the recovery of "usurious" interest payments.

Timeline and Duration

• Introduction: The bill was introduced in the Senate on February 4, 2025, and referred to the Committee on Banking, Housing, and Urban Affairs.
• Sunset Provision: This act includes a "sunset clause," meaning the provisions are not permanent. The amendments made by this Act are scheduled to expire and be repealed on January 1, 2031.