S. 381: 10 Percent Credit Card Interest Rate Cap Act

This bill, titled the 10 Percent Credit Card Interest Rate Cap Act, proposes to amend existing regulations under the Truth in Lending Act. Its primary objective is to limit the annual percentage rate (APR) on credit card interest to a maximum of 10 percent. Here are the key components of the bill:

Cap on Interest Rates

The bill states that:

• The APR for credit cards cannot exceed 10 percent, which includes all finance charges associated with the credit card.
• Fees that do not count as finance charges under existing laws cannot be used to bypass this 10 percent cap.
• If a lender charges an interest rate or fees that exceed this limit knowingly, it is considered a violation of the law, leading to potential consequences.

Recovery of Excess Charges

Individuals or their legal representatives who have paid interest rates or fees greater than the permitted amount can:

• File a claim to recover the excess amounts charged.
• Bring this action within two years from the date they last made an excessive payment.

Consequences for Noncompliance

Lenders who do not comply with this cap may face legal repercussions outlined in section 130 of the Truth in Lending Act.

Additional Provisions

The bill also clarifies that:

• No state law that offers greater consumer protection can be overridden by the provisions of this bill.

Sunset Clause

The amendments for the interest rate cap will not remain in effect indefinitely. Specifically, the provisions requiring the 10 percent cap will be removed effective January 1, 2031, unless further action is taken to extend or modify this provision.

Technical Amendments

The bill includes necessary updates to synchronize the changes with existing legal texts in the Truth in Lending Act.

Effective Date

The changes proposed by the bill will go into effect starting January 1, 2031, giving time for lenders and consumers to adjust to the new regulations.

Relevant Companies

• JPMorgan Chase (JPM) - As one of the largest credit card issuers, JPMorgan Chase could be directly impacted by the cap on interest rates, potentially affecting their profitability and lending strategies.
• Citigroup (C) - Another significant player in credit card services, Citigroup may need to adjust its credit policies and interest rates due to this legislation.
• American Express (AXP) - As a major credit card issuer, American Express could see a direct impact on its business if the bill is passed, affecting how they offer credit to consumers.