Date: 1986-02-04
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. in recent months. the House Banking Committee has been at the forefront of the effort to reduce costly credit card interest ratesrates averaging 19 percent at a time when banks only pay 7 to 8 percent to borrow money. On October 29. we focused national attention on the issue through a Banking subcommittee hearing on skyrocketing credit card interest rates. Committee members have joined others in the Congress in introducing legislation which could significantly reduce credit card interest rates from their current levels. or which would require credit card issuers to clearly state their annual fees. finance charges. and grace periods so that consumers can make an informed choice when selecting a credit card. As committee chairman. I have been highly critical of the financial industrys practice of forcefeeding consumers credit cards through mass mailings of unsolicited preapproved MasterCard. Visa. or other applications. Lured by the prospect .of a $5..000 line of credit. the consumer doesnt even notice the accompanying 18-. 19-. 20percent ihterest rateor the substantial annual feeuntil its too late.. Consumers are overpaying to the tune of millions of dollars a yearmoney that could be going into their pockets rather than into the bloated coffers of our Nations banks and other institutions. It is estimated that reducing credit card interest rates to the 1980 level of 17.13 percent would save consumers up to $700 million annually. The financial industry is doing its best to keep rates high. While its quick to climb onto the free marketplace bandwagon when lobbying the Congress with its insurance. securities. and real estate wish lists. the industry pays lipservice to the concept when it comes to the consumer. Is it just a coincidence that the Citicorps. Chases and Bank of Americas have. all kept their interest rates close to 20 percent? Or have they made a gentlemans agreement not to steal each others customers by lowering rates? Indeed. why compete for customers when it means offering reasonable credit card interest rates. low bank service -lees and minimum balance requirements. and redcarpet treatment for the masses? Our efforts are being heard. however.-Barely a week goes by without the press reporting a bank here. a thrift there that has voluntarily lowered its credit card interest rates. Suddenly. 14-. 15-. 16percent interest rates are being advertised alongside the heavy hitters. While some institutions may be rushing to lower rates to head. off Congress at the legislative pass. others are realizing that it makes good economic sense to be competitive. When my colleague from New York. Mr. ScHUMER. issued a list of 30 financial institutions nationwide offering the lowest credit card interest rates. the institutions were bombarded with Inquiries from thousands of consumers. I want to take this opportunity to urge everyone. and especially my fellow Rhode Islanders. tocomparison shop before selecting a credit card. Many of us think nothing of going from store to store until we find the best buywhy not do the same when choosing a bank? For years the financial Industry has profited from a complacent clientele. But I assure you. once consumers flex their economic muscles. banks will be falling over each other to offer the lowest Interest rates. I applaud the many Rhode Island banks. thrifts. and credit unions offering credit cards at interest rates lower than the national average. For example. the Rhode Island Hospital Trust. with 36 branches around the State. is offering credit cards at 17.8percent interest with a $15 annual fee. while the Eastland Bank. with branches in Cranston. Cumberland. Johnston. North Providence. North Smithfield. Providence. Smithfield. and my hometown of Woonsocket. boasts a 17percent interest rate with a $21 annual fee. The Washington Trust Co. in Westerly even gives customers a choicepay off your bill.In full each month and pay a $15 annual fee with no interest charge. or pay iipartandpay a 15.5percent interest charge with no annual fee. Rhode Island credit unions are offering rates as low as 15 percentwith no annual fees. Take the Westerly Community Credit Union in Westerly. or the Davisville State Chartered Credit Union in Davisville. Across the border in Massachusetts. banks are also climbing aboard the bandwagon. Quincys State Street Bank offers credit cards at 16.5 percent with a $20 annual fee. the Bank of New England at 16.8 percent with a $21 annual fee. Shawmut Bank at 16.98 percent with a $24 .annual fee. and the Bank of Boston at 17 percent with a $21 annual fee. However. more needs to be done. To illustrate what many Institutions are actually charging. the following list is provided: