Bill to amend credit card interest rate fails in Senate

NEW JERSEY: Senator Frank R. Lautenberg (D-NJ) on May 13 expressed disappointed regarding the failure of the Senate to pass an amendment that would cap the Annual Percentage Rate (APR) consumers pay at 15 percent, the same interest rate cap that Congress imposed on loans and credit cards issued by credit unions almost 30 years ago.

The lack of a national APR has allowed banks to charge interest rates as high as 41 percent on credit cards while receiving zero interest loans from the Federal Reserve.  Some Americans currently pay between 15 and 19 percent APR.

"Since credit card companies seem unwilling to put any limit on the unconscionable interest rates they charge to Americans, Congress needs to step in and protect consumers," Sen. Lautenberg said. "Especially during this economic downturn, we have to stop credit card companies from taking an already bad situation for struggling families and making it worse."

In 1980, Congress imposed a 15 percent rate cap on loans and credit cards issued by credit unions.  The provision Sen. Lautenberg supported would have extended that rate cap to credit cards offered by commercial banks. 

Until 1978, approximately half of the states had laws capping credit card interest rates.  While several of these state laws remain, they were effectively overturned by a 1978 Supreme Court decision (Marquette National Bank v. First of Omaha Service Corp) which concluded that national banks could charge whatever interest rate they wanted if they moved to a state without a law.

The APR provision was offered to legislation co-sponsored by Sen. Lautenberg, the Credit Card Accountability Responsibility and Disclosure Act (CARD), which would protect consumers from unfair and unacceptable credit card practices, ending abusive fees and rate increases, ensuring more disclosure and strengthening oversight.  The CARD Act was authored by Sen. Christopher Dodd (D-CT) and, in addition to Sen. Lautenberg, was cosponsored by more than 20 Senators.