Financial Markets:

Federal Reserve Board Opposition to Credit Card Interest Rate Limits

GGD-87-38BR: Published: Apr 7, 1987. Publicly Released: Apr 7, 1987.

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Pursuant to a congressional request, GAO evaluated the soundness of congressional testimony that a Federal Reserve System (FRS) official gave on proposed legislation to limit credit card interest rates.

GAO found that FRS is opposed to such legislation because it believes that: (1) financial markets distribute credit more efficiently and productively in an unregulated environment; and (2) reasonably competitive conditions exist in the credit card industry despite a lack of variation in credit card interest rates. GAO also found that: (1) the information FRS presented in its testimony was factually accurate and it used the underlying data logically to support reasonable arguments; and (2) the survey FRS uses to acquire its data may be flawed because participation is voluntary and there are differences in operating characteristics between participating and nonparticipating institutions.

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