Dodd: Movement To Cap Credit Card Interest Rates Growing

Sen. Chris Dodd (D-Conn.) released the text of his credit card reform package on Monday and we posted it online, asking for your thoughts. More than 90 percent of readers who wrote in wanted to know why there was no cap on interest rates as part of the bill. So we asked Dodd about the omission.

"I suspect before this week is out we'll get a couple proposals in that area," he said. What amendments will be offered is still being debated and will ultimately be decided by Senate Majority Leader Harry Reid (D-Nev.).

"I can't speak for my colleagues, but I can tell you there's a growing appetite for that, when you look at some of these rates, in fact, rates as high as 32 percent," said Dodd, chairman of the banking committee.

"There used to be a time you could go to jail for charging rates like they charge today. Even organized crime would blanche at some of these fees. So there'll be a movement in that regard. There's obviously some legitimate arguments about opposing caps and I'm listening to them, but frankly the overwhelming majority of people I talk to would like to some limitation put on these rates."

Sen. Bernie Sanders, an independent from Vermont, and Sen. Dick Durbin (D-Ill.) have both introduced rate caps -- with Durbin at 36 percent Sanders at a much lower 15 percent.

Dodd said he's still weighing the issue, but could be convinced.

"I'm still inclined to want to do something in that regard, but is there a magic number or not? I'm kind of up in the air on that. I want to be realistic about it," he said. "I know that Bernie has talked about rates that credit unions use -- 15 percent plus three percent -- but what people don't tell you is that they also have a lot of fees at credit unions that make that 15 or 18 percent a little bit illusionary."

The problem with a cap on annual interest rates (APR), said Dodd, is that folks who lend for just a few days might be driven out of business. But ignoring those lenders, he said, misses some of the most "vicious" interest rates.

"We may need to be more creative in how we think about putting limitations on that kind of a [payday] loan as opposed to a loan that is more based on APR rates," he said.

How about a cap just on credit card interest rates?

"There could be. That could happen," he said.

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Comments

[Amerigucci]

If I am 3 days late paying my electric bill (first time ever), Citibank has access to that information and raises my rates (to 36%) even though I haven't been late paying my credit card bill.

How is it that members of Congress can let that stand?

[Amerigucci]

Dodd is so out of touch with real life in America.

When is Congress going to start working on behalf of the people, and not the corporations? When are Americans going to say 'Enough!' and take back the government?

[DougNTexas]

Lets see now. Banks pay a couple 2% or three % on deposits, but charge 18-20 to even 36% in interest all the while being bailed out by the tax payers for poor performance! What is wrong with that picture. Then to top that off, Bankers get millions and millions in salaries and bonus. I would have been fired had i done things that bad on my job.

[MsEngineer]

It can't be a fixed number like 15%. What happens if the prime goes up to 15 or 20%? The banks need to charge above prime so it needs to be prime plus some number which I suggest is 10%. In addition there needs to be a cap on how much the increase can be at one time. Say 1 or 2%. This is the way Adjustable Rate Mortgages work (at least the way the use to work). The rate you are charged is tied to a central number like the prime rate or the t-bill rate and if you are smart the change of rate is capped too.

36% shows just how out of touch our so called representatives are with those of us who make under 100k a year. The only people they represent are big business and financial groups.

[Troubledwawa]

"A growing appetite".­..

Translation: When the banks give me permission, I may do it.

[bogu]

Vote Dodd out of office NOW. He's been in bed and stroking the banking industry for his entire tenure in the Senate. He will never back any legislation against the banking industry that is favorable to the consumer.

Get rid of him and all incumbents. "Yes we can" ...

[SusanFromTX]

So true! Check out http://www.maplight.org/ to see who contributed to your congresspeople. The corruption is sickening.­..

And the disinformation!! Credit cards DO NOT charge the kind of fees that banks do. If you don't have access to a credit union through your job, ask your relatives - lots will allow family members to join.

The Dems are in the same bed with the banks (and corporations) as the Republicans. We have no one to defend our interests. And Obama is part of the problem, not the solution. I'm not voting for him again.

[Jepps11]

"Growing appetite" ???? As if people are just starting to worry about being ripped...W­ouldn't insatiable be more accurate?

[liberalbug]

Dodd, bought and paid for by some of the finest in the banking industry. Every once in awhile they toss us a small bone to argue over, to make us argue with each other, and to make us think they are working for us, but as they sip their chardonnay and smoke their cuban cigars at their DC clubs with their banker friends, the reality is they don't give a rip about you and me. We are merely taxpayers funding their latest folly.

[getsit]

Caps are reasonable, not 36%. With interest rates so low to non existant for the banks, borrowing even at 15% interest is too high. I think 10% is just fine. The higher the interest rates the more likely balances won't be paid back. This keeps the borrowers on the hook for almost forever. The old saying, that you can't get blood from a turnip, applies. If the banks worked with their clients there will be fewer defaults and bankruptcies because I believe that most people want to pay their credit cards off.

I don't understand what Dodd said about credit union "fees". My credit union does not charge the same fees as banks, and has no overdraw or late fees on my credit card.

The congress needs to listen to their consituents. Were losing on a number of fronts-losing jobs, losing retirement incomes, losing our homes, losing our healthcare or being charged more, more local fees for all kinds of services, state and local taxes going up & up, and then being gutted by the credit card companies. We need a break and the president/congress needs to see reality.

[Cyberoptic]

Since the democrats have the majority, they can no longer blame problems on the repubs. Some of them are being revealed as the problems. We have to remember who they are and vote them out. And vote in someone who is not a clone of the guy being voted out.

And right now, we have to re-enact the Glass-Steagall Act.

[MrWampler]

One thing that's bothers me, but I never see discussed, is that the fees become part of the balance, of which interest is charged. Is this being addressed?

Same with the finance charge (compound interest), but interest and fees are two different things.

[BurtonOerney]

The U.S. Supreme Court held unanimously in the 1978 Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. case that the National Banking Act of 1863 allowed nationally­-chartered banks to charge the legal rate of interest in their state regardless of the borrower's state of residence.­[22] In 1980, due to inflation, Congress passed the Depository Institutions Deregulation and Monetary Control Act exempting federally chartered savings banks, installment plan sellers and chartered loan companies from state usury limits. This effectively overrode all state and local usury laws.[23][­24]

22 ^ Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299 (1978).
23^ Usury rate limits Reference: Interest rate usury limits for U.S. states, 'Lectric Law Library.
24^ http://www.fdic.gov/bank/analytical/bank/bt_9805.html The Effect of Consumer

[justsomeguywhocameby]

Thank you BurtonOerney,

I've been wondering when and why this happened.

[biglover]

Frank is not a member of the senate. If you are going to name names, then list all the rethugs who love the banks and the credit card companies/

[DragonFly]

Gee, can you be anymore 'wishy-washy' in your response, Senator Dodd?

And what's this about Durbin proposing a 36% cap?!

What's next?
People's first-born?
Slave-labor for the oligarchs?
Blood sucking straight from the neck?

[DocTwain]

Sanders has got the right idea, but 12.5% is too much, let alone 15%.

Dodd is a cartelist who has been in DC too long. The banking cartel has owned him for decades.
Throw him out and put in a progressive!

There are too many so-called "Democrats" in Congress who do not reflect voters' values.

The majority of Americans want single-payer health care.
The majority of physicians want single-payer health care.
Yet the "Democrats" are the ones ruling it out!

Clean out the dinosaurs!
Run primary challenges and support candidates who will fight the cartels!

[NWBrunette]

Set the limit at 10% or 2% over prime, whichever is higher. Period. Restore the usury laws and enforce them. The situation now is ridiculously immoral.