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Senate panel OKs credit card rate curbs

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Senate Democrats are making a new stab at limiting credit card interest rates -- fueling bankers’ threats that the measure will further reduce consumers’ access to credit.

From Bloomberg News:

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A Senate panel approved new restrictions on credit-card interest rates that are broader than those adopted by the Federal Reserve in December, brushing aside objections from Republicans and the banking industry. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said the measure was needed to protect consumers from having their interest rates raised on previous balances, unless certain conditions are met. The legislation would prevent credit-card companies from unilateral changes to the terms of an agreement. The legislation also would require card companies to disclose how long it would take to pay off a balance when making a minimum monthly payment and require statements to be mailed at least 21 days before the payment due date, up from 14 days. It would also prohibit banks from charging interest on fees, such as those imposed for late payments or exceeding credit limits.

The measure passed the committee on a 12-11 vote and now goes to the full Senate. The House Financial Services Committee is expected to take up its version of the bill on Wednesday.

The American Bankers Assn. immediately attacked the Senate bill, saying it had ‘deep concerns that the legislation passed by the committee will harm consumers and the economy at the very time our country can least afford it.’

From the ABA’s statement:

Credit cards provide access to credit for millions of Americans and small businesses every day. Making this credit available is a very risky business and the committee’s action today will unfortunately make it harder -- not easier -- for banks to continue doing so. Credit card lenders of all sizes will likely have to pull back on providing reasonably priced credit to a wide range of consumers and small businesses. It is hard to see how that makes good policy sense.

-- Tom Petruno

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