Consumer Finance

Rhode Island Eyes Capping Credit Card Interest Rates

credit cards

In the United States, credit card balances and the interest rates charged on those balances are on the rise.

In the latest data, more than $870 billion in credit card debt is outstanding in the United States. Interest rates rose over the last several months, by roughly 200 basis points — as the Federal Reserve hiked its own benchmark rate (though it should be noted that the Fed’s hikes have come off of relatively low levels).

The $870 billion aforementioned tally, the Federal Reserve estimated earlier this month, marks the first time credit card balances reached 2008 nominal peaks.

In Rhode Island, there seems to be a groundswell to limit the interest rates that can be charged on card balances, at least in that state.

As reported Monday, lawmakers in that state such as senators Jack Reed and Sheldon Whitehouse are endorsing the Empowering States’ Rights to Protect Consumers Act.

“Americans are paying huge credit card fees and very high credit card interest rates and there is very little protection for them,” Sen. Whitehouse said, according to WPRI. “This bill would restore states’ ability to protect their own home state consumers from out of state banks that often gouge them.” Rates are “abusive,” said the senator.

As noted by the site, a Supreme Court ruling dating back to the 1970s means that banks (and their credit cards) are bound by the states in which they are based, rather than the laws of the states where their customers live. Before that ruling, in a case titled Marquette National Bank of Minneapolis v. First of Omaha Service Corp., each state could enforce state-wide usury laws against lenders doing business within its borders.

A response from the American Bankers Association via an unnamed spokesperson quoted by the site said consumers have choice in cards, and that the nationwide CARD Act is preferable to what the spokesperson termed “a 1970s patchwork of inconsistent state laws would be a step backward and could result in a loss of credit availability in many places.”

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