KANSAS CITY, MO -
A measure being considered in the U.S. House of Representatives could prevent credit card companies from surprise interest rate increases and hidden fees, but bankers are fighting back, saying the measure could have a major impact on their financial systems.
The bill, called the Consumer Credit Fairness Act, would prevent companies from raising their interest rates higher than 15 percent, plus the current yield on a 30-year treasury bond. That combined rate is currently 18.5 percent.
"The default payments when people are late on their credit card bills are incredibily damaging to consumers because it will raise interest rates easily into the 20's and sometimes 30-percent level, which makes it difficult to ever get out under those," said bankruptcy attorney Neil Sader.
The bill also limits banks from imposing upfront fees and requires them to implement a 45-day advance notice before higher interest rates can be charged.
Kenneth Clayton of the American Bankers Association is urging Congress to consider the impact the new regulations will have on banks.
"These changes have forced a complete reworking of the credit card industry's internal operations, pricing models and funding mechanisms," said Clayton.
If the Consumer Credit Fairness Act becomes law, it could be implemented in 90 days.
The bill, called the Consumer Credit Fairness Act, would prevent companies from raising their interest rates higher than 15 percent, plus the current yield on a 30-year treasury bond. That combined rate is currently 18.5 percent.
"The default payments when people are late on their credit card bills are incredibily damaging to consumers because it will raise interest rates easily into the 20's and sometimes 30-percent level, which makes it difficult to ever get out under those," said bankruptcy attorney Neil Sader.
The bill also limits banks from imposing upfront fees and requires them to implement a 45-day advance notice before higher interest rates can be charged.
Kenneth Clayton of the American Bankers Association is urging Congress to consider the impact the new regulations will have on banks.
"These changes have forced a complete reworking of the credit card industry's internal operations, pricing models and funding mechanisms," said Clayton.
If the Consumer Credit Fairness Act becomes law, it could be implemented in 90 days.
