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Dodd Calls for Interim Freeze on Credit Card Fees and Rates
Senator Christopher J. Dodd, Democrat of Connecticut, on Monday proposed freezing interest rates and fees on existing credit card balances until a new law took effect.
Senator Dodd, the chairman of the Senate Banking Committee, said his bill was necessary because banks were raising rates “to squeeze customers” before the remaining provisions of law took effect in February.
The new credit card law, which was passed in May, seeks to stop banks from arbitrarily raising interest rates.
Last week, the House Financial Services Committee passed legislation to move up the effective date for the credit card law, which will restrict interest rate increases and hidden fees, from Feb. 22 to Dec. 1. The measure is opposed by the banking industry, which says it will be difficult if not impossible to meet the expedited deadline.
“At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt,” Mr. Dodd said in a statement. “People need to be responsible with their money, but they shouldn’t be taken to the cleaners by outrageous fees.”
Kirstin Brost, a spokeswoman for the banking committee, said none of the industry’s objections about expediting the provisions of the credit card law applied to a simple rate freeze.
“Everybody has been trying to figure out a way to move this up, so Dodd said, ‘O.K., we are calling your bluff,’ ” she said.
In the last year, as the economy sputtered and credit card delinquencies increased, banks have slashed credit lines and raised interest rates and fees on many customers to offset the losses. The banking industry predicted that the credit card law would mean higher fees and fewer rewards, even for better customers.
Scott Talbott, senior vice president for government affairs at the Financial Service Roundtable, said his organization, which represents large financial institutions, opposed the bill to freeze rates. He said the bill was based on the faulty premise that credit card interest rates were going up because of legislation.
Instead, he said, interest rates were rising because of risks posed by the unsteady economy and by card holders themselves, who are defaulting on their payments or paying late more often.
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