Senate might consider cap on card interest rates

By Jeff Plungis
Bloomberg News / May 13, 2009
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The US Senate might consider capping interest rates on credit cards, Banking Committee chairman Christopher Dodd said as the lawmakers began debating amendments to consumer-protection legislation.

Dodd told reporters yesterday that he is "inclined to do something" about an interest-limit, which isn't in the bill. He said he is talking about the possibility with other senators.

"There's a growing appetite for that," said Dodd, a Connecticut Democrat. "There used to be a time you'd go to jail for rates like this."

Dodd and Richard Shelby of Alabama, the banking panel's senior Republican, reached an agreement over the weekend on the measure, which restricts how lenders increase credit card rates and impose fees. The bipartisan support makes it more likely that revised credit card rules will reach President Obama's desk this year.

Senator Bernie Sanders, a Vermont independent, will offer an amendment limiting all lenders to 15 percent interest rates, he said in a written statement. That's the same limit that applies to cards offered by credit unions, according to the statement.

The Senate doesn't have an agreement limiting the number of amendments on the legislation, according to Dodd, who said he hopes a final vote will take place before the end of the week.

The Senate legislation would require lenders to apply credit card payments to balances with the highest interest rates first. It would prohibit increasing a consumer's rate on existing balances based on late payments to another lender, a practice known as "universal default."

The bill would require credit card companies to give 45 days' notice before increasing an interest rate. It prohibits retroactive rate increases on existing balances unless a consumer was 60 days late with a payment.