Magazine article American Banker

D'Amato to Seek Federal Cap on Credit Card Rates

Magazine article American Banker

D'Amato to Seek Federal Cap on Credit Card Rates

Article excerpt

NEW YORK -- Sen. Alfonse D'Amato plans to introduce legislation today that would put a federal cap on redit card interest rates, marking the latest congressional salvo aimed at the credit card business.

Mr. D'Amato, a New York Republican who sits on the Banking Committee, proposes that credit card rates be limited to four points above the interest rate used by the Internal Revenue Service when it collects delinquent payments and pays late refunds.

The IRS now uses a rate of 11%, so, under Mr. D'Amato's bill, credit card rates would be limited to 15%. Most banks now charge 18% to 20% interest on their credit cards.

"We understand the banks have a right to make profits -- we want them to make profits -- but this is legal usury," Mr. D'Amato said. He estimated that American consumers are paying $2 billion to $3 billion more than they should in credit card finance charges.

Mr. D'Amato announced his bill Monday at a hearing of the New York State Senate committee on banks, which is also looking into credit card interest rates.

Mr. D'Amato was joined at the hearing by two fellow New Yorkers, Rep. Charles E. Schumer and Rep. Mario Biaggi, both Democrats who have introduced similar legislation in the House to cap credit card rates.

The Washington legislators made it clear that they are trying to pressure banks to lower their credit card rates.

"The federal government shouldn't be legislating interest rates," said Mr. Schumer, a member of the House Banking Committee. …

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