WASHINGTON–While its prospects may be dim, a bill in Congress to cap credit cards APRs had been dropped, with its sponsor citing credit unions’ ability to offer lower-rate loans as a counter to bank complains that such a limit will much lending unprofitable.
Rep. Bernie Sanders, the Vermont Independent, has proposed a bill that places a 15% cap on consumer loans, including credit cards. The law would supercede a 1978 Supreme Court decision allowing banks to charge whatever was allowed by the state in which its lending or card operations were based. Sanders called his proposed 15% ceiling a “national usury law.”
Sanders expressed dismay that some lenders, including Capital One, were raising carholders’ APRs to 18% even in cases were the cardholder had been paying on time and was not delinquent. He also cited Citigroup, JPMorgan, Chase, Bank of America, Well Fargo and American Express for increasing the rates charged to cardholders on revolving balances. He said the focus on mortgage interest rates was keeping attention from being focused on the rates banks are charging on personal loans. He called some of the practices “loan sharking.”
While a 15% cap on consumer loans for credit unions was initially put in place, it was raised to 18% in 1987. Sanders argued that credit unions’ ability to profitably offer such loans means that banks can, as well. "If a rate cap has worked for credit unions all these years, it could work for our friends in the financial industry as well," Sanders said.
