[h/t Sam Smith's Undernews]
http://www.sanders.senate.gov/news/record.cfm?id=310323
Date Posted: 03/23/2009
LET'S STOP WALL STREET LOAN-SHARKING
Senator Bernie Sanders
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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
place.
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
Delaware.
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
percent.
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?