Magazine article American Banker

Some States Moving to Set Ceilings on Credit Card Interest Rates

Magazine article American Banker

Some States Moving to Set Ceilings on Credit Card Interest Rates

Article excerpt

Some states, unwilling to wait for Congress to impose a nationwide ceiling on credit card interest, are moving to impose their own caps.

In Illinois, said James Civik of the state bankers association, "there are several bills, as a matter of fact. And we expect a good deal of action on that issue."

In Georgia, bankers testified at a November presession hearing and are keeping a wary eye on the issue. The legislature convened in early January.

Even in Oregon, where the Legislature rejected the idea last year, Frank Brawner, executive vice president of the state bankers association, said with resignation, "I would expect that issue not to be a dead issue."

Similar comments are heard in other states, though it is unclear just how many legislatures are considering caps.

But it is a consumer issue, and that makes it attractive to legislators in an election year. The states are merely following congress' lead.

The House overwhelmingly passed a bill restricting the time financial institutions can hold deposited checks, to the inconvenience of their customers.

In the states, bills to propose ceilings on credit card interest are often similar to congressional proposals.

In South Carolina, where the legislature got rid of all rate ceilings less than three years ago, two bills were introduced. One suggested a cap of 6% over the Federal Reserve Bank's discount rate; the other suggested 3.5% over the prime rate.

The legislature convened in early January, and the bills were high on the agenda. But by Jan. 22, both bills had been effectively killed for this session. One was tabled in committee, according to Robert H. Hodge Jr., executive vice president of the South Carolina Bankers Association, and the other was withdrawn.

Mr. Hodge said the legislature only recently replaced a system that fixed rates, "and that was so complex nobody knew what the rates were. …

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