Liberal Dems Push to Cap Credit Card Rates
A group of liberal House Democrats on Tuesday unveiled legislation that would cap credit card rates at 18 percent. This should not to be confused with the push to freeze rates on existing balances, which made headlines last week — the Democrats’ cap would apply to future transactions as well.
The sponsors of the proposal — Reps. Maurice Hinchey (D-N.Y.), Peter Welch (D-Vt.), John Tierney (D-Mass.) and Jim McDermott (D-Wash.) — will offer the measure as an amendment to the Credit Card Holders’ Bill of Rights, which is scheduled for a House vote as early as Thursday.
“This amendment will help end the credit card trap and provide Americans with the comfort of knowing their credit card rates won’t soar to eye-popping levels while still providing credit card companies with large enough margins to enjoy a profit,” Hinchey said in a statement.
But don’t expect the provision to get very far. Though the larger bill has wide bipartisan support in the House — where it passed by a vote of 312 to 112 last September (including support from 84 Republicans) — the addition of a rate cap would likely be a deal-breaker for many lawmakers. Indeed, Rep. Carolyn Maloney (D-N.Y.), the chief sponsor of the larger bill, has been quick to emphasize the absence of rate caps as a key selling point of her proposal. Critics of such caps maintain that they would prevent the card companies from setting their rates based on the risk posed by the borrower — a change that would result in rate hikes for all card users.
That argument, combined with industry opposition to most any reforms at all, makes the amendment a poison pill to the larger proposal. For that reason, even supporters of the cap might choose to vote against it.