WASHINGTON — The House voted overwhelmingly Wednesday for legislation requiring banks and other credit card issuers to give consumers information about interest rates, financial charges and other fees when they apply for cards through magazine advertisements, direct mailings or telephone solicitations.
Democrats and Republicans, who endorsed the sweeping legislation on a 408-1 vote, said the measure would give customers a better ability to choose among thousands of credit card offers that are proliferating nationwide. They also predicted that it would lead to increased competition and lower credit card rates.
Earlier, however, House members defeated a proposal limiting the amount of interest that banks and other firms could charge for credit card services. Sponsors said the rule would benefit millions of consumers, but opponents contended that it would discourage banks from offering credit cards to lower-income people, seniors and other "marginal" customers.
Bill Has White House Support
The legislation, which has the support of the White House, banking industry associations and many consumer groups, now goes to the Senate, where it is expected to receive strong support.
"As a credit card user, I am angered by unsolicited mailings and telephone calls which offer credit cards but fail to tell me about the basic annual rates, fees and other charges involved with these cards," Rep. David Dreier (R-La Verne) said.
"Today the interest rates charged by credit card companies are very high compared to other products," he added. "If consumers had more information about differing rates, they could save millions of dollars in credit card payments every year."
Dreier and other sponsors noted that, under current law, credit card companies are not required to tell customers about interest rates, monthly payments and annual renewal fees until they issue them cards. The proposed legislation would require that such information be disclosed during the application process.
Under the bill, any firm that offers a credit card through a magazine advertisement with an attached application or makes a direct mail or telephone solicitation would have to disclose:
--The annual interest percentage rate to be charged.
--All fees imposed for use of the card, such as monthly finance payments or annual charges.
--Any grace period or the amount of time in which credit can be extended before interest charges are applied. If there is no grace period, that must be spelled out.
Also, companies offering charge cards--which are not subject to finance charges--would have to disclose all fees and tell customers that charges must be paid in full on a periodic basis.
Before the final vote, there was intense debate over a proposal by Rep. Frank Annunzio (D-Ill.) that would have put a limit on the monthly interest rates that banks and other credit card issuers could charge customers. The amendment would have limited interest charges to no more than eight points above the yield on one-year Treasury securities.
"In today's market, where the average credit card interest rate is more than 18%, that would mean an interest rate of no more than 15.5%," Annunzio said. "If banks can't make money at 15.5% interest rates, then they should get the hell out of the banking business."
Annunzio and other House members predicted that an interest limit would lead to a "credit card war" and lower charges for consumers. But Rep. Charles E. Schumer (D-N.Y.) said it would have the opposite effect by jacking up charges for annual fees and other credit card costs.
If interest charges were limited, Schumer said, many firms would charge the maximum and might be reluctant to give credit to less affluent customers. More important, he added, the legislation is not needed because more than 100 banks now offer interest rates below 12%.