Hellfire, pitchforks and credit card caps

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Sen. Bernie Sanders of Vermont, introducing a bill last week to cap credit card interest rates at 15%, quotes Dante and the Bible to make his point about the current situation:

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

Sanders also mildly points out that credit union loans have long been capped at 15%. But that’s about the only mild thing in his statement. Here he is on banks taking taxpayer bailouts, then doubling their customers’  credit card rates:

The “Masters of the Universe” on Wall Street – through their greed,
recklessness and illegal behavior – have plunged this country into a
deep recession causing millions of Americans to lose their jobs, their
homes, their savings and their hope for the future.  In order to fully
understand the cause of this fiasco, I have introduced legislation
calling for a thorough investigation of the financial meltdown and the
prosecution of those CEOs who broke the law.  The culture of greed,
fraud and excessive speculation must come to an end.
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

Sanders’ idea isn’t all that fresh. Sen. Al D’Amato sponsored a similar bill in 1991 that passed the Senate but never made it into law, under open fire from the White House and banks, and hidden enmity from lawmakers. Here’s a telling paragraph from the New York Times about what happened back then:

Democrats see the issue as an embarrassing one for President Bush and
want to keep it alive as long as possible. But many lawmakers,
insisting on anonymity, said they would vote against it if they thought
it stood a chance of becoming law.

This time around the White House might be a little more sympathetic, but lenders will again scream that credit will dry up and banks will go under.  Oh, wait, that’s already happening, because the banks did so many stupid, greedy things. So the argument may be a little harder to sell.

Sen. Dick Durbin of Illinois, the Senate’s assistant majority leader, has also signed on as a sponsor, giving the bill some weight beyond Sanders’ reliable progressiveness. Durbin is also sponsoring a bill to cap "payday lending" interest at 36% a year, unlike the 300% or more that’s charged now.

That doesn’t mean the bill has a serious chance of becoming law. The same forces that killed D’Amato’s bill in 1991, and killed Durbin’s similar payday lending bill last year, are still prowling Congress.

Since 2006, commercial banks alone have spread $37 million in contributions around Congress, according to OpenSecrets.org, and that doesn’t even count the lobbying millions. The related investment and securities industry contributed $102 million, and the remainder of the financial industry $40 million.

Given the odds, I wish Sanders hadn’t so quickly dismissed the hellfire, pitchforks and "rivers of boiling blood."

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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