February 1, 2010
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News: Act Aims to Cap CC Interest Rates
New proposed legislation is being debated in the House Rules and House Financial Committees that would capped credit card interest rates at 16 percent. The Restoring America's Commitment to Consumers Act was introduced into Congress by Louise M. Slaghter (D-NY) and Representative John Tierney (D-MA). Slaughter, Chairwoman of the House Committee on Rules, says the new bill is aimed at limiting "unreasonable fees on credit card accounts" and gives consumers relief from the weight of 30 percent interest rates. The bill will provide the following:
• Establishes a National Consumer Credit Usury Rate that will amend the Truth in Lending Act that will establish a usury rate that prohibits an annual credit card annual percentage rate (APR) to exceed 16 percent. The Act requires the inclusion of any fee such as membership fees or annual service fees when determining the compensation.
• Authorizes the Federal Reserve's Board of Governors to adjust credit card's APR when necessary in the public interest and economic conditions. The adjustment must fully protect consumers and "severe economic conditions" must exist to justify the increase. The Board will consider the prevailing prime rate, overnight loans to banks, and relevant statistical information.
• Requires the Board to notify Congress immediately of any adjustment to the maximum APR giving them 60 days to file disapproval upon such a resolution, the increase would cease.
• Requires any adjustment to the maximum credit card APR take effect 90 days after notification to Congress.
• Protects any credit card account with less than a 16 percent APR prior to December 8, 2009, and extending 60 days past the date of the Act's enactment.
• Limits a variety of fees imposed on credit card accounts such as late fees and over-the-limit fees to $15.00.Unlike the nine month delay in the effective date for the Credit CARD Act 2009, if passed, the Restoring America's Commitment to Consumers Act would become effective immediately upon enactment.