Consumer Law

The effective repeal of usury laws in the US was accomplished in the quietest possible way:  In 1978, the Supreme Court interpreted an century-old banking law to determine that federally-chartered banks to lend to people in other states so long as they complied with their home state's usury rate.  It wasn't long until the Chairman of Citibank paid a call on the governor of South Dakota, who rammed through a new, high ceiling on interest rates.  Now Citibank was free to charge whatever it wanted--and states lost the right to protect their own citizens.

The usury story is old and famliar to commercial law types, but it is taking on a new importance.  It seems that John McCain wants to borrow the idea for use with insurance regulation.  According to a terrific piece by Robert Gordon in Slate, Senator McCain thinks federal law should be changed so that insurance companies in one state (say, South Dakota) could sell their products in all the other states, even if those insurance products don't meet the local standards for care.  In other words, just as exporting interest rates became a way to deregulate credit cards, exporting health insurance licensing can be a way to deregulate health insurance.