Friday, May 15, 2009
Arguing that credit card companies are acting more like loan sharks than businesses, Senator Bernard Sanders (I-VT) wants to cap interest rates on consumer credit cards at 15%. But the majority of his Senate colleagues, including many Democrats, balked at the idea and rejected it in a vote (60-33) on Wednesday. The bipartisan opposition gave heed to warnings from the banking industry that passing a cap on credit card interest rates would hurt the stock market.
Sanders argued that credit card companies and banks were behaving like criminals, and pointed out that one-third of all credit card holders are paying interest above 20% and as high as 41%. “When banks are charging 30% interest rates, they are not making credit available,” said Sanders. “They are engaged in loan sharking.” Sanders also noted that credit unions already have a 15% cap on the interest rates they can charge.
Sanders had hoped to add the interest rate cap provision to a bill that places other restrictions on credit card companies. That bill is still alive in Congress and would prohibit companies from raising interest rates on existing balances unless a card holder is 60 days behind on payments. The legislation would also require companies to give consumers 45 days notice before rates go up, and companies would not be allowed to charge late fees if they’re late in processing payments.
-Noel Brinkerhoff
Senate Rejects a 15% Ceiling on Credit Card Interest Rates (by Carl Hulse, New York Times)
Sanders Says Credit Card Companies Should Lower Interest Rates (by Ross Sneyd, Vermont Public Radio)
Roll Call Vote on H.R.627 (New York Times)
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