Carper helps banks kill credit card rate cap

Kaufman also votes against 15% limit to protect consumers

By NICOLE GAUDIANO
News Journal Washington Bureau, Delawareonline

WASHINGTON -- A plan for a national cap on credit card interest rates was defeated Wednesday by the Senate.

The proposal to cap rates at 15 percent would have been a significant change for Delaware, which hasn't had usury laws on the books since they were abolished in 1981.

"In a free-enterprise system, I'm not sure that [interest rate caps are] what we need to do," said Sen. Tom Carper, D-Del. He and Sen. Ted Kaufman, D-Del., were among 60 senators who voted to block a vote on the measure, offered as an amendment to a larger credit card reform bill.

However, Democratic Sen. Chris Dodd of Connecticut, chairman of the Senate Banking Committee, said Wednesday's vote shouldn't be interpreted as a rejection of the concept. An analysis of which rate caps would be appropriate for which institutions under which financial circumstances would be helpful, he said.

"It's a confusing issue, except for the fact that most of our constituents and millions of Americans would like to see some restraint," Dodd said. "I don't know how you possibly could explain why some institutions get away with rates that are literally triple digits."

The American Bankers Association opposes rate caps, as well as the overall credit card reform legislation, expected to come up for a vote in the Senate this week. It says the bill would jeopardize access to credit. But consumer groups say it would put an end to abusive practices.

The Senate bill is considered to have stronger protections for consumers than either legislation that passed the House last month or Federal Reserve regulations. It would give consumers 45 days' notice before rate increases and allow them to pay by phone without additional fees. It would prohibit rate increases in the first year after a credit card account is opened, prohibit interest charges on paid-off balances from billing in the previous cycle, and protect young people from aggressive solicitations.

Unlike the House bill or Fed regulations, the bill would prohibit retroactive interest rate increases until an account is 60 days past-due. It also would be implemented in nine months. The House bill would take effect in a year. The Fed's regulations would take effect by July 1, 2010.

President Barack Obama has strongly advocated credit card reform and has asked to have legislation on his desk by Memorial Day weekend