[lbo-talk] Sanders: Cap credit card rates w/ national usury law

Michael Pollak mpollak at panix.com
Sat Mar 28 04:37:56 PDT 2009

[h/t Sam Smith's Undernews]


Date Posted: 03/23/2009


Senator Bernie Sanders


In the midst of this financial disaster, one of the great frustrations

that I hear from my constituents is that while taxpayers are spending

hundreds of billions bailing out major financial institutions, and

while these big banks are getting near-zero interest rate loans from

the Fed, these very same financial institutions are now charging

Americans 20 percent or 30 percent interest rates on their credit

cards. In fact, one-third of all credit card holders in this country

are now paying interest rates above 20 percent and as high as 41

percent - more than double what they paid in interest in 1990.

Recently, some major institutions such as Bank of America have informed

responsible cardholders that their interest rates would be doubled to

as high as 28 percent, without explaining why the increase was taking


Let's be clear. At a time when many Americans in the collapsing middle

class use credit cards for groceries, gas and college expenses, what

Wall Street and credit card companies are doing is not much different

from what gangsters and loan sharks do when they make predatory

loans. While the bankers wear three-piece suits and don't break the

knee caps of those who can't pay back, they are still destroying

people's lives.

The Bible has a term for this practice. It's called usury. And in The

Divine Comedy, Dante Alighieri's epic poem, there was a special place

reserved in the Seventh Circle of Hell for sinners who charged people

usurious interest rates.

Today, we don't need the hellfire and pitch forks, we don't need the

rivers of boiling blood, but we do need a national usury law.

We need a national law because state laws no longer work. States used

to protect consumers from predatory lenders, but strong state usury

laws were obliterated by a 1978 U.S. Supreme Court decision. Justices

allowed national banks to charge whatever interest rate they wanted if

they moved to a state without an interest rate cap like South Dakota or


That is why I have introduced legislation to require any lender in this

country to cap all interest rates on consumer loans at 15 percent,

including credit cards. Why did I select 15 percent as the appropriate

rate to deal with the usury which is going on in this country? The

reason is that 15 percent is the maximum that Congress imposed on

credit union loans almost 30 years ago when it amended the Federal

Credit Union Act. And that approach has worked! Under current law,

credit unions are allowed to charge higher interest rates only if their

regulator, the National Credit Union Administration (NCUA), determines

that it is necessary to maintain the safety and soundness of these

institutions. Right now, while most credit unions charge lower rates,

the NCUA allows credit unions to charge an interest rate as high as 18


Unlike their counterparts at the big banks, credit unions are not

lining up for hundreds of billions in bailouts. In fact, they're doing

quite well. As Chris Collver, legislative and regulatory analyst for

the California Credit Union League recently stated; "It hasn't been an

issue. Credit unions are still able to thrive." In my view, if these

rules have worked well for credit unions for decades they can work for

all financial institutions.

In 1991 former Senator Al D'Amato offered an amendment to cap credit

card interest rates at 14 percent. The amendment passed the Senate by

a vote of 74-19, but never became law. Now is the time to return to

that debate.

Incredible as it may seem, over the last decade the financial sector

has invested more than $5 billion in political influence purchasing in

Washington. This includes funding some 3,000 lobbyists and huge

amounts in campaign contributions.

The American people are thoroughly disgusted with the behavior of Wall

Street and they want their elected officials to respond to the greed of

major financial institutions. A cap on interest rates would be a good

start. Do we have the courage?

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