By Georgia Kelly
It seems that most people I know pay off their credit cards in full every month, or their accountant or secretary pays the bills, which means that the debtor doesn’t see the inserts that accompany these invoices. Lacking this information, prompt payers have no idea about the Debtors’ Prison without Walls that surrounds them in their own communities. So, it’s past time to shed some light on this scourge and let everyone know exactly how indebted our nation is because of the outright and shameless usury that is allowed in this country.
How many people know that credit card banks are allowed to charge interest rates up to 39.99 percent? Does one really expect that someone paying that rate on a balance of maybe $5,000 is going to pay that down anytime soon? Especially if they have an unforeseen medical bill, a needed car repair, dental bills, rising costs in food, housing, gas, utilities, etc. – some of these expenses are bound to end up on credit cards for many people. Also, credit card debt increased during and because of lost work during COVID.
With such obvious usury, you might ask why our congressmen and senators aren’t doing anything about this travesty. The cynic in me says it’s because their wealthy donors and corporate donors don’t carry credit card debt and this problem is simply not on their radar. If the donors aren’t complaining, there is no reason to rock the boat.
People don’t talk about credit card debt because they think it’s shameful, that it means they are not responsible in a way that society expects of them. That feeling of shame has allowed this robbery to go on much too long. It’s time to call out these banks and call out our representatives to do something about it. And, let’s not be ashamed to tell our stories. There is power is sharing our experiences and realizing that we are not alone and that together we could knock down these invisible prison walls of debt.
Senator Bernie Sanders has proposed a mandatory interest rate on credit cards at 10 percent, but the senate hasn’t picked up on it. Senator Elizabeth Warren held congressional hearings several years ago where she questioned bank presidents in front of Congress on their usury practices. She shamed them, got relief for some people at the time, and created the Consumer Protection Board. But, as we can see, these banks regrouped and have escalated their interest rates while prices for everything are rising.
Total U.S. credit card debt stands at $1.25 trillion, one of the highest figures on record. With prices rising but not wages, this figure is likely to rise even more. In California alone, credit card debt amounts to $116 billion, which is above the national average. In addition to credit card debt, student loans in the Bay Area amount to a total of $26.6 billion. It’s important to remember that university tuition was practically free 50 years ago. Defaults on student loans have been increasing. In fact, the New York Times featured an article on ex-pats with student loans who have moved abroad and have no intention of paying off that debt, especially as they know university is free or nearly free throughout Europe.
So, how did all this happen?
First, a 1978 Court Ruling, Marquette National Bank v. Frist of Omaha Service Corp, declared that a national bank only had to adhere to the interest rate caps of its home state, not the other states where their customers lived. This allowed banks to relocate to states where the rules were lax and they could charge higher interest rates to credit card holders in every state.
Second, in 1980 South Dakota eliminated its legal caps on interest rates and allowed banks to charge whatever interest rates they wanted. This deregulation encouraged many banks to relocate their headquarters to South Dakota.
Third, Acknowledging the success of South Dakota’s ruling, Delaware enacted the Financial Center Development Act in 1981, which essentially copied the elimination of interest caps.
Today, most banks issuing credit cards are based in either South Dakota or Delaware for the above reasons.
The credit card boom began in the 1970s. I remember getting my first credit card, American Express, in 1984. I didn’t know that as a woman I would not have been able to secure a credit card ten years earlier without a man as a co-signer. Times had changed. Now, women can accrue as much debt as any man, and this has been sold to us as liberation.
A quick search on Google will tell you that at the federal level, there is no maximum limit or cap on credit card interest rates that banks can change. Today, when more and more people are struggling financially and prices are rising, credit cards are going to see a lot more action. This is why it is imperative that we call, write, and lobby our congressmen and senators to pass legislation that will enact a cap on credit card interest rates. Since we are unable to change these rates at the state level because of federal law, we must lean heavily on our congressmen and senators. Find out where they stand on this issue and what they intend to do about it. Currently, the 10 Percent Credit Card Interest Rate Cap Act that would limit rates is in the House (HR 1944) and the Senate (S. 381). It requires the 10 percent cap rate staying in place for 5 years. In the Senate, the bills were introduced by Bernie Sanders (I) and Josh Hawley (R).
We can do something about this, especially in an election year. Bring this issue up at every town hall you attend and find out where the candidates stand. So far, the above bills have not had enough support to pass in the House or Senate. Let’s change that and put an end to this egregious usury!
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