Credit Card Interest Rates Might Soon Be Capped At 16 Percent



Posted: Saturday, January 23, 2010

by Jeremy Wallace
Political de Facto

Recently the Restoring America's Commitment to Consumers Act of 2009 has been proposed in Congress to amend the Truth in Lending Act to establish a national interest rate of 16% for consumer credit card accounts under open end consumer credit plans.

Congresswoman Louise Slaughter (D-NY) and Rep. John Tierney (D-MA), who have introduced The Restoring America’s Commitment to Consumers Act, have outlined the three key components of this legislation. First, it would cap credit card interest rates at 16%, which would include the initial fees disclosed at the onset of a contractual agreement. Second, it would limit all additional fees charged by credit card issuers, such as late and fees, to $15 per fee. Lastly, it would not replace current state laws that have already placed a lower interest rate cap.

Louise Slaughter, in a recent statement, has said, “The best gift we could give Americans in the new year would be to finally put an end to outrageous credit card interest rates that hurt hard-working people." “We must do what we can to help people who are trying to make ends meet in the face of card rates that suddenly jump to 20, 25, 30 percent or even more. It’s time for Congress to put the needs of people ahead of banks and card issuers. My intention is to hold a hearing at the Rules Committee on this legislation as quickly as possible."

According to the Federal Reserve, "Half of all banks recently said they were increasing interest ratesand reducing credit lines on borrowers with good credit scores. Forty percent of banks said they were imposing higher fees." Additionally in an ABC News report, Bank of America, JP Morgan, Citigroup and American Express have all increased rates on consumers within the last year. If this legislation were to pass Congress it would show that they are on the side of consumers, rather than these big credit card companies.

The credit card industry has already begun fighting back by hiring an advocacy group, The Community Financial Services Association Of America, to lobby Congress and try to prevent them from implementing caps on credit card interest and fees.

This bill is scheduled for a hearing later this month in the House Rules Committee and we shall see who's side our elected officials are actually on.

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