Of all the financial reform rules debated in the past few weeks, few would have impacted as many consumers as the one championed by Sen. Sheldon Whitehouse.
The Rhode Island Democrat introduced an amendment that would have let states cap credit-card interest rates. Had it passed, it would have closed a loophole that has long allowed credit card companies to headquarter in states that don't cap interest rates on credit cards and then export high rates to other more consumer-friendly jurisdictions.
Whitehouse would have allowed states to impose restrictions on rates charged by out-of-state lenders.
But it was defeated Wednesday night by a 60-35 vote. Two Republicans, George LeMieux of Florida and Thad Cochran of Mississippi, voted with 32 Democrats and Independent Bernie Sanders of Vermont to support consumers in their fight against lenders.
Among those voting for megabanks, which dominate the credit card industry, were Ted Kaufman of Delaware and Maria Cantwell of Washington, two Democrats who have been particularly critical of the influence wielded by the nation's largest financial institutions. Both senators voted to break up the nation's megabanks on a separate amendment to the Senate's financial reform bill.
Kaufman defended his vote when questioned by the Huffington Post about the apparent inconsistency.
"It creates a patchwork of interest rates and laws around the country," he said. "You wouldn't know... where your credit card company is, what interest rates you're paying, and what the rules are.
"That being said, I do represent Delaware and in Delaware the credit card business is a major, major part of our industry, just like in West Virginia [where] coal is a major part of their industry," he said.
Delaware, like South Dakota, is one of the few states that doesn't cap interest rates. Because of a 1978 U.S. Supreme Court decision barring states from capping interest rates charged by out-of-state lenders, Delaware and South Dakota are home to the biggest credit card companies and lenders.
"I am not running for reelection," Kaufman said. "My name says, 'Ted Kaufman, D-Delaware.' I know some people want to say, 'Here you voted for Delaware.' I'm fine with that."
Referring to the series of amendments and votes cast in the Senate's attempt to reform the financial industry and how it's regulated, Kaufman said, "There are some hard ones. This was not hard."
Just 14 Delaware-based banks hold about $337 billion in credit card debt, according to the latest quarterly figures from the Federal Deposit Insurance Corporation. That's nearly half of all credit card debt held by the nation's nearly 8,000 banks.
Meanwhile, the average credit card interest rate (for purchases) stands at 14.04 percent on variable-rate cards, and 13.7 percent on fixed-rate cards, according to the latest weekly survey by Bankrate.com.
Those rates have steadily climbed during the year. During the first week of January, the average fixed-rate card charged 13.47 percent, while the average variable-rate card charged 11.54 percent.
Credit cards charging upwards of 30 percent are common. Many lenders jacked up their rates in preparation for the recently-enacted credit-card reform legislation, which would have prohibited arbitrary rate hikes.
The Federal Reserve's main policy-making body noted during its April meeting that the spread between credit card rates and two-year Treasuries had widened since January. A widening spread means that consumers are borrowing at higher rates relative to what lenders are being charged.
Of the nearly $717 billion of credit card debt held by the nation's nearly 8,000 banks, more than two-thirds of it, or about $475 billion, is held by just four companies: Bank of America, JPMorgan Chase, Citigroup and Wells Fargo.
Bank of America's and JPMorgan Chase's main credit card lenders are based in Kaufman's home state of Delaware; Citigroup and Wells Fargo run their big credit card operations out of South Dakota.
Together, South Dakota- and Delaware-based banks hold about two-thirds of all the credit card debt in the nation's banking system.