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Will Congress act to cap credit card interest?

It is no secret that many Ohio families rely on credit card debt. This blog recently reported the average household balances for Ohio residents. And as recent posts indicate the credit card companies are not shy in charging high interest rates that can leave Ohio families and individuals financially stressed. Cincinnati bankruptcy attorneys are well aware of the difficulty Ohioans are experiencing in this rough economy.

An east coast congressman says that a large number of "hardworking Americans are using credit cards to make ends meet in this recovering economy." Representative Maurice Hinchey (D-NY) says the "credit card companies are finding new ways to squeeze the middle class despite significant reforms in the last Congress."

The congressman recently introduced legislation that would place a "reasonable cap" of 15 percent on credit card interest rates and all other loans. He is concerned that credit card balances and interest rates are trapping U.S. consumers "in a spiral of debt."

Hinchey has described the measure as a proposed extension of the federal rules and regulations currently governing credit unions. In essence, these rules and regulations make it illegal for credit unions to engage in usury, meaning charging outrageous interest rates on loans or credit cards. "We need to put an end to this legalized loan sharking," says Hinchey.

Critics say the measure does not have a great chance of passing in Congress. Recent financial overhauls in Congress could have lawmakers balk at adding new financial legislation. Many experts believe the changes in Congress, with the House now controlled by Republicans and the Senate controlled by Democrats may lead to increased gridlock on the hill.

The proposed measure does include a provision for the Federal Reserve to readjust the 15 percent interest rate cap. Firms that are financially jeopardized by the cap and in instances when the money market interest rates rise over a sixth month period are the kinds of circumstances where the Federal Reserve would be authorized to allow interest rates to exceed 15 percent under the measure.

Source: The Wall Street Journal, "U.S. Lawmaker Renews Push for Credit Card Rate Cap," Maya Jackson Randall 20 Jan 2011

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