PROVIDENCE – Lawmakers are considering legislation that would reinstate Rhode Island’s interest rate cap for credit cards.
The “Credit Cardhorder Protection Act” (S-0479), sponsored by Sen. James C. Sheehan, D-Narragansett, and Sen. J. Michael Lenihan, D-East Greenwich, would close a special interest legal exemption in Rhode Island law that permits banks and credit card issuers to charge significantly higher interest rates.
The two legislators say the measure is needed in light of the nationwide credit crunch and a statewide recession that has left thousands of Rhode Islanders with no safety net from predatory credit lenders and credit card issuers.
State law prohibits any individual or entity from charging an interest rate greater than 21 percent per annum or 9 percent above the domestic prime rate, whichever rate is lower. But another law contains an exemption for credit card transactions.
The bill, which had its first hearing before the Senate Corporations Committee last week, would eliminate that exemption.
Previous attempts to cap credit card interest rates failed in the General Assembly. In 2007, Sheehan and Lenihan said, three separate proposals were introduced to protect credit cardholders. One bill, which passed the House, would have removed the usury exemption on credit card transactions. Its Senate companion bill, sponsored by Sheehan, was not voted out of the Senate Corporations Committee.
