(Host) Congressman Peter Welch is leading an effort that could affect the pocketbooks of thousands of Vermonters.
Welch wants to place a cap on credit card interest rates. He says the measure is needed because some banks are ripping off consumers with "Mafia style" practices.
VPRs Bob Kinzel reports:
(Kinzel) Welch wants to offer his plan as an amendment to legislation known as the Credit Card Holder’s Bill of Rights – a proposal that supporters say is needed to curb rampant abuse by some credit card companies.
The overall bill would prohibit companies from imposing retroactive interest rate increases or excessive fees, it would prevent the companies from issuing cards to minors and it would protect consumers from due date gimmicks and double cycle billing.
Welch’s amendment would cap all credit card interest rates at 18%. He argues the cap is needed because late fees and penalties now total almost 20 billion dollars a year and account for 50% of the industry’s profit:
(Welch) "Some credit card companies are up as high as 40% and just as recently as 1990 credit cards didn’t charge over 20% and now the majority of credit card people are paying over 20%. So if we’re going to restore responsibility to lending then there’s got to be an interest rate cap ceiling that’s reasonable -they can make money. Credit cards are a good thing for consumers and businesses but the banks have near monopoly power and the reality is they’ve been abusing it so we’ve got to put a lid on it."
And Welch says many companies charge higher interest rates to offset bad debt they’ve incurred through the reckless distribution of their cards:
(Welch) "Credit card companies and banks have a responsibility to do realistic risk assessment and not just pass the bill onto the middle class and the small businesses that do pay their bills and are willing to pay their bills. They shouldn’t be paying for the irresponsible conduct of the credit card issuers."
Chris D’Elia is the president of the Vermont Bankers Association. He says his group doesn’t necessarily oppose the interest rate cap but he hopes Congress will take a larger look at the credit card industry than what’s contained in the House bill:
(D’Elia) "Take a comprehensive look at the whole issue of credit cards – all of the different aspects of credits cards – and make sure that you come up with a responsible approach to dealing with the concerns that the public has raised, and they’re legitimate concerns. And also making sure that you don’t create any unintended consequences by implementing some of the measures that might be passed."
Welch plans to present his amendment to the House Rules committee on Wednesday.
That committee will then decide whether or not to include it as part of the larger bill that’s scheduled to be debated on the House floor later this week.
For VPR News I’m Bob Kinzel in Montpelier.