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The new credit card law, which becomes effective at the end of February, introduces many important new protections for credit cardholders. However, lawmakers stopped just one step short of tackling the most troublesome aspect of credit cards: the oftentimes exorbitant interest rates levied on cardholders.
Granted, card issuers will no longer be able to raise credit card interest rates retroactively on existing balances once the new law steps into effect (unless the cardholder is 60 days behind with payments). However, credit card companies can still change rates on future charges to credit cards, and there are no upper limits for how high rates can be set; card issuers just have to give cardholders 45 days notice. And of course, card issuers can still charge whichever rates they see fit on any new credit cards issued.
If some Indiana Senate lawmakers have their way, however, credit cardholders in Indiana may soon be spared from exorbitant credit card interest rates, at least rates above 21 percent. Indiana State Senator Brandt Hershman (R) has amended a bill making its way through the Senate, and if the bill passes with the amendment intact, the state of Indiana will no longer invest money with banks issuing credit cards with rates above 21 percent to cardholders with good credit.
“Public funds are being deposited in more than 100 financial institutions throughout the state,” Hershman said in a press release accompanying the bill. “If these entities are issuing credit cards with unfair interest rates and forcing their consumers with good credit histories to pay unjustified charges, then these institutions should not be rewarded with taxpayer deposits.”
As basis for the proposed bill, Hershman points to the dramatic jumps in credit card interest rates that card issuers have levied on consumers over the past year, even for cardholders who always pay on time.
“Hoosier families and consumers are struggling to make ends meet,” Hershman said. “Already, taxpayers have been forced to bail out Wall Street and banks. Although the credit card industry is regulated by the federal government, I am working at the state level to do what I can to control unjustified increases. State depositories should not be biting the hands that feed them.”
With property taxes and other funds deposited in more than 100 financial institutions across the state by Indiana public institutions ranging in the billions, Indiana lawmakers might just hit card issuers where it hurts the most, should the bill be signed into law. The bill joins a long lineage of bills that have previously sought to put caps on credit card interest rates, so far without success. Pending legislation in the U.S. House of Representatives seeks to cap credit card interest rates at 16 percent.
