But does it go far enough? At least one member of Congress, Bernie Sanders, thinks not. While he voted for the bill, he also added that he is going to continue to fight for interest rate caps. In a Senate floor speech, he said:
“It is a good bill. It is an important step forward in protecting consumers, but I am going to be back on this issue of usury. In the United States of America we have got to finally tell banks and credit card companies that it is simply not acceptable to charge people 25 percent, 30 percent or 35 percent interest rates.” Sanders recently tried to introduce a 15 percent rate cap, but was not successful.
When I started in the credit education field in 1986, there were still a number of states trying to protect their constituents through usury laws. But they were losing the battle due to a 1978 Supreme Court decision (Marquette National Bank v. First of Omaha Service Corp.) which allowed national banks to charge whatever they wanted. All they had to do was move their operations to a state without a usury law (think South Dakota, Delaware) and then they could export their high-rate cards to any state in the country. Sanders notes that in 1978, about half of the states in the country had usury laws that limited credit card interest rates.
At Credit.com, many of our staffers (including yours truly) have received notices over the past several months warning that our interest rates on our credit cards would be going up. We're just a drop in the bucket, though. The Center for Responsible Lending says an estimated 10 million cardholders have received notices of rate increases over the past six month. CRL also found in a recent survey that there are high levels of support for an annual interest rate cap on consumer loans of no higher than 36 percent. According to the CRL survey, three out of four Americans think that Congress should cap interest rates at some level, and 72 percent think that level should be no higher than 36 percent.
The new legislation is a hard-won and important victory for consumer advocates and members of Congress who spearheaded it. My hats are off to them.
But is the fight over? Or should rate caps be next? What do you think?
GerriDetweiler – Personal finance author and Credit Advisor for Credit.com,
Gerri contributes budgeting, debt recovery and savings information online. She
is also the co-author of Reduce Debt, Reduce Stress:
Real Life Solutions for Solving Your Credit Crisis .
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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Most high interest credit cards are usually easy to get and really the interest rate only matters if you roll over your balances from month to month. People that have had bankruptcies, judgments or just have a bad credit rating, for what ever reason are the most common applicants for high interest credit cards.