Magazine article American Banker

D'Amato Urges More Credit Card Disclosure

Magazine article American Banker

D'Amato Urges More Credit Card Disclosure

Article excerpt

ALBANY, N.Y. -- Charging that there is a conspiracy of silence surrounding the disclosure of credit card interest rates, Sen. Alfonse M. D'Amato urged members of the New York State Senate standing committee on consumer protection to take action to stem "legal usury."

Appearing at a public hearing before the committee, the New York Republican said that it "seems unjustifiable and frankly icomprehensible that the interest rate charges by the institutions that issue credit cards have not reflected the steep declines in short-term interest rates experienced in other areas of commercial and consumer lending."

Mr. D'Amato said, "I want to examine why banks and thrifts generally have not passed on the reduced cost of funds to their customers by lowering interest rates on credit card loans. The cost of money to these institutions as measured by the discount rate they pay for money is 7.5%, and the prime lending rate is 9.5%, but one average interest rate on creidt cards is 19.2%. These facts demonstrate that the average rate charged to consumers has actually gone up while the cost of money has gone down."

The senator listed a number of banks among the institutions with the highest credit card rates, including the Bank of America, the First National Bank of Chicago, Citibank, and Chase Manhattan, all at 19.8%, and Chemical Bank at 19.5%. He indicated that he was encouraged when Manufacturers Hanover Trust Co. lowered its rate from 19.8% to 17.8%, but he said he "was discouraged by reports that it was unlikely that other major credit card issuers would lower their rates."

the highest credit card rates he cited were at Montgomery Ward, Sears, and J.C. Penney, all at 21%. The five lowest interest rates were Union National Bank, Little Rock, Ark., at 12.5%; Simmons First National, Little Rock, Ark., and Gem Savings Bank, Ohio, both at 13. …

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