For hundreds of years, societies have protected borrowers from despotic interest rates of lenders. Likewise, most states in America had laws protecting its citizens. In 1978, in ruling on Marquette vs. First Omaha Service Corp, the supreme court in its typical arrogance, held that banks were limited by the limits of their home state. The Supreme Court had no concern for you and I, the citizens. The court put banking interests above state law. As could be expected, major credit card companies began relocating to states with liberal or NO usury laws. in 1981 Citibank moved to South Dakota, not because South Dakota was a banking center, but because that state allowed banks to rape and pillage borrowers check books. In 1982 Maryland's four largest banks relocated their credit card operations to Delaware. To hang on to credit card business, many states began loosening state usury rates. In the early '80s, most states capped interest rates to between 12 percent and 18 percent. Today, most banks have caps between 18 percent and 24 percent. The Supreme Court effective allowed banks to set their own limits throughout America. The foxes guarding the henhouses.
Of course, interest rates caps aren't the only protection going by the wayside. California, Delaware, South Dakota and Tennessee are among the states offering the least protection. These four states currently have NO LIMIT on delinquency fees, cash advance fees, over-the-limit fees, transaction fees, stop payment fees, ATM fees, and mandatory grace period. What this means to the us in Louisiana is, of course. if we make the mistake of getting a credit card from a bank within one of these four states ... the banks can do whatever they please to us.
To put this issue into perspective, consider a $10,000 credit card debt with Citibank at 32%.If you pay a typical $267.67 typical minimum payment, it will take you over 40 years to pay it off, at a cost of more than $118,000 in interest. Usury is defined by Webster's Dictionary as, "an unconscionable or exorbitant rate or amount of interest." I would certainly say that $118,000 interest on a $10,000 debt would fit that definition. It doesn't take a rocket scientist to see that these banks have been a major cause of bankruptcies in the U.S. Yet, instead of Congress trying to protect American consumers, they gave their ears to the more than 100 million dollars that banks spent to get the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" passed. Certainly, the Enrons and MCIs will continue getting away with unscrupulous financial practices, and being allowed to bankrupt to get out of their debts. But, George Bush and Congress made it practically impossible for American consumers to get out of the debts that unconscionable banking practices that are the cause of the necessary bankruptcies. Congress has done NOTHING, and will continue to do NOTHING for you and I, the consumers, until we pull in the reins of these dispicable banking practices.
One of the most egregious examples I have see so far is one institution that charges a $500 loan fee and 141.42% interest of a $1,500 loan. Yes, it's true.
I will wholeheartedly support legisation to restore fair usury laws. I favor capping all US Bank credit card interest to 5 percent above the federal dicount rate. I will support the repeal of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005."
Furthermore, I will support laws controlling how banks assess overdraft fees. Banks should be required to reduce checking account balances by the smallest to largest incoming checks, instead of the practice of reducing the accounts by largest to smallest, in order to eextract the largest amount of fees from the account holder.
Links:
Bankruptcy reform a joke, but nobody is laughing
Wikipedia - Bankruptcy Abuse Prevention and Consumer Protection Act