SALEM — Congressman John Tierney is pushing legislation that would cap credit card interest rates at 16 percent.
The Salem Democrat yesterday announced plans to file the Renewing America's Commitment to Consumers Act, a bill that would also cap any contingency fees, such as charges for late payments, at $15 per fee.
Credit card holders, even those with strong credit histories and a track record of timely payments, have recently experienced dramatic rate hikes, Tierney said. Interest charges have risen to as high as 30 percent, he said.
Tierney blamed the increases on credit card companies attempting to make up for revenue losses expected to be experienced once a series of reforms take effect in February. Those reforms, passed by Congress last spring, will require banks to give consumers a 45-day advance notice of rate increases.
But Tierney wants to go further than a warning to protect consumers and curb what he describes as the "exploitative practices" of credit card companies.
The struggling economy has kept wages flat and forced people to rely more on credit cards to cover their expenses, he said.
Companies, meanwhile, have made credit accessible but costly by "unfairly" and "arbitrarily" raising interest rates across more customer accounts than ever before, according to Tierney.
He hopes to file the bill within the next week. Congresswoman Louise Slaughter, a Democrat from New York, and Congressman Michael Capuano of Somerville are fellow sponsors.
"For too long, average Americans have been asked to shoulder debt under conditions they can do little to control," Capuano, a candidate for Senate, said in a press release. "This bill will protect consumers by ensuring access to affordable credit, and it couldn't come at a more critical time."
Vermont Sen. Bernard Sanders, an independent, tried to get a similar provision through the Senate last May. It failed by a 60-33 vote.
Opponents, including the American Bankers Association, argue that a government-imposed cap would restrict the credit card market and make it harder for consumers to borrow money.
"People who might find it harder (to access credit) are people who aren't creditworthy," Tierney said in response.
The bill would limit membership fees. And it would "ensure the strongest protections possible" because its provisions would not supersede any state law with a lower cap.
Tierney and two colleagues tried unsuccessfully to add an interest cap in the reform legislation that passed earlier this year.
It is not a novel concept, he said. Laws limiting "usurious behavior" have been in place since the Babylonian Empire.
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