Senate Nears Completing Credit Card Bill, Blocks 15% Rate Cap

May 14 (Bloomberg) -- The U.S. Senate, working to complete legislation to curb credit-card fees and limit contract changes, refused to cap interest rates on balances at 15 percent.

The Senate may pass the so-called credit-card bill of rights measure as early as today, said Banking Committee Chairman Chris Dodd. Approval would send the measure to a committee to resolve differences with a House version.

“We’ve spent a lot of time over the last number of months trying to help stabilize the financial system,” said Dodd, a Connecticut Democrat. “A lot of attention has been paid to banks. We haven’t spent enough time trying to help consumers.”

Senators yesterday voted 60-33 to invoke budget rules that killed the rate cap proposed by Senator Bernie Sanders, a Vermont independent. Sanders said the action was needed to stop banks from routinely charging 25 percent to 30 percent on credit cards.

“When banks are charging 30 percent interest rates, they’re not making credit available, they’re engaged in loan- sharking,” Sanders said.

The Senate credit-card legislation would require lenders to apply payments to balances with the highest interest rates first. It would prohibit increasing a consumer’s rate on existing balances based on late payments to another lender, a practice known as “universal default.”

The bill would require credit-card companies to give 45 days’ notice before increasing an interest rate. It would prohibit retroactive rate increases on existing balances unless a consumer was 60 days late with a payment. Companies would have to restore the original, lower rate if a cardholder stayed current six months after a late payment.
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