Abercrombie Cosponsors Legislation To Cap Consumer Interest Rate At 15 Percent
Press Release
Financial institutions are receiving the largest taxpayer-funded bailout in history, and the Federal Funds Ratethe amount banks pay to borrow funds is 0 and 0.25%. Yet, many of these same banks turn around and charge interest rates as high as 35% on credit cards and consumer loans. Payday lenders have been charging interest rates as high as 800%," said U.S. Representative Neil Abercrombie. "That's why I've co-sponsored legislation to cap interest rates on consumer lending at 15%."
The Interest Rate Reduction Act establishes a maximum rate of 15% on all lenders. The bill also imposes a reasonable cap on lending fees, which have risen dramatically over the past decade. The Federal Reserve would have the authority to allow lenders to charge a higher interest rate if it determines that the 15% cap would threaten the safety and soundness of individual lenders; or if money market interest rates have risen over the preceding six-month period.
"Credit union members have been protected from interest rates above 15% since 1980, and they continue to have full access to credit cards and loans," Abercrombie said. "Credit unions remain safe and sound. To date, not one has had to ask for taxpayer assistance. This legislation extends the same interest rate ceiling to all lenders."
The Interest Rate Reduction Act amends the Truth in Lending Act to prohibit the annual percentage rate of interest (APR) applicable to any extension of credit to a consumer from exceeding 15% on unpaid balances, inclusive of all finance charges.
Less than a month ago, Abercrombie cosponsored the Credit Cardholders Bill of Rights, which will protect consumers from unfair credit card company practices, such as retroactive interest rate hikes on existing balances, double-cycle billing, and due-date gimmicks. The bill was passed by Congress and signed into law on May 22nd. He's preparing legislation now to extend most of the same consumer credit cardholder protections to America's small businesses.
"So many families in Hawaii are fighting to make ends meet, gouging them with unreasonable interest rates on loans and credit cards is simply unconscionable," Abercrombie said.
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