Credit card companies are jumping on the opportunity to raise people’s interest rates before the Credit Card Act takes effect next year.
Andrew from Austin sent me an e-mail the other day. He said, “I received a letter from Citibank telling me they are raising my interest rate on my credit card to 18.99%. I have excellent credit. Come to find out though, they have sent this letter to many of my family and friends.”
Remember these are many of the same companies that have received TARP money and only lawmakers can do something about this.
So I decided to look at the Credit Card Act and see which of our local Texas lawmakers co-sponsored it. One of those was Rep. Lloyd Doggett (D, TX-25). So I sent him Andrew’s e-mail and this was his response:
“I opposed the Wall Street bailout and have been urging more consumer protection because of arrogance just like this. This is a real ripoff.”
In fact this week the House is considering financial regulatory reform, which includes consumer protection legislation. Rep. Doggett has just joined on a bill to place a cap on credit card interest.
It’s called ‘Support the Restoring America’s Commitment to Consumers Act’ and would:
- Create a National Credit Card Usury Rate: The bill would create a National Credit Card Usury Rate, which would cap interest rates at 16 percent.
- Limit unreasonable fees: The 16 percent usury cap would include certain “up-front” fees associated with the extension of credit, such as membership fees and annual fees. All other fees not included in the cap, such as late fees or insufficient funds fees are capped at $15.00 per fee.
- Clarification of state law: In order to ensure the strongest possible protections for consumers, the bill clarifies that the bill’s provisions will not supersede any state law with a lower usury cap.
- Laws limiting this kind of usurious behavior have been in place since the Babylonian Empire and were present in the United States on the state level until 1978 when a Supreme Court ruling effectively eliminated states’ usury laws. That decision called on Congress to act and address the issue with new legislation, but Congress has not acted to do so and rates have continues to climb unchecked.
A couple of things to keep in mind, the first portion of this Credit Card Act took effect in August. That means banks must give you 45 days notice on major changes like a hike in interest rates. And you have the right to reject the changes, but that means you’re canceling your credit card. That gives you up to five years to pay off your current balance at your existing rate.
Has your credit card company raised rates?
What do you think should be done?
Add your thoughts below.