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Posts with tag: interest-rate-cap | Return to ShoppingBlog.com Homepage
House Caves to Banking Lobby, Refuses Interest Rate Cap
So many politicians, including President Obama, have been promising credit card reform. Polling shows that 90% of Americans support reigning in the outrageous practices of some credit card companies, such as double cycle billing, using a universal default rate and making interest rate increases retroactive. Today the House passed a so-called "Credit Cardholders' Bill of Rights" with much fanfare. The bill now goes to the Senate. So, is this the reform we've been waiting for? In a word, no. In fact, it's a big fat joke at consumers' expense.
The bill has a few decent provisions, such as outlawing double cycle billing and retroactive interest rates hikes and cracking down on credit card offers to teens. But it really just tap dances around the real problem: the interest rates. There is no federal usury law. That is the bottom line. There is no limit whatsoever for the amount of interest, fees and penalties that a credit card company can charge a consumer. None. Rates as high as 35% are common right now, especially among consumers who are unemployed and those that have financial troubles due to illness. The interest rate hike makes it nearly impossible for those facing financial hardship to ever climb out of debt. Just to put this in perspective, today a jumbo CD at a major bank pays around 1.5% for a term of under one year.
The problem has a simple solution. There must be a federal usury law that caps interest rates (including all penalties, fees and interest charges) at a set rate, such as a maximum of 18%.
That simple cap eliminates the need for all those rules about over the limit fees and the like, because no matter what happens, the interest can never exceed 18%. At least one brave congressman tried to institute a rate cap of a maximum of 18%, but was overruled by the House leadership.
The bill now goes to the Senate where it will be watered down even further at the behest of the banking lobby. If you'd like to read the bill as it stands now, go here.
Posted on April 30, 2009
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