Defenders of federal preemption place big banks ahead of consumers

This regulatory debate centers on 'federal preemption,' a legal concept that allows national banks to follow federal rules instead of varying state laws. For retailers and operators, this is a critical issue because it dictates how much interest and what fees your financing partners can charge. If federal preemption is weakened, the national lenders you use today may have to comply with a patchwork of 50 different state usury laws and consumer protection codes. This would likely lead to higher compliance costs for lenders, which often trickles down to merchants in the form of higher discount rates or reduced approval volumes in certain 'tough' states. The current push against preemption argues that federal regulators have been too lenient, allowing big banks to bypass state-level interest rate caps designed to protect consumers. If state regulators gain more power, expect your financing partners to become more selective. Some may even stop lending in specific states entirely if the local rate caps make the business unprofitable. This could leave your customers with fewer options at the point of sale. While the debate is currently in the legal and political spheres, the outcome will define the availability and cost of consumer credit for years to come.

Source: American Banker — Top News

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