Credit Card Rate Capped at 16 Percent Under New Proposal

Lawmakers from New York and Massachusetts introduced legislation this month that would cap credit card interest rates at 16 percent, while forcing banks to abandon service charges deemed "unreasonable" on Capitol Hill. Democratic representatives Louise Slaughter and John Tierney proposed a new bill to be slated for a hearing before the House Rules panel. Under current banking rules, states set the ceiling for bank finance charges instead of the federal government. Most credit card issuers base their lending operations in Delaware or South Dakota, two states with no limits on interest rates.

Previous attempts to legislate lower credit card finance charges met resistance in Washington, even as broader banking regulations earned lawmakers' approval. Instead of a fixed ceiling on interest rates, the Credit CARD Act signed into law last spring implements restrictions on when lenders can change the terms and conditions of accounts. D.C. insiders told reporters that they expected heavy lobbying on both sides of the bill, especially in light of anti-banking industry sentiment among American consumers.