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Wednesday, November 25, 2009

Should Congress limit bank loan charges?

In the late 1970s, Congress, the Carter administration and the Supreme Court stopped US enforcement of the old Judeo-Christian concept of usury - that it's wrong to charge too much interest on loans - by allowing credit card companies to "export" interest rates from business-friendly states like Delaware and South Dakota, bypassing limits in other states.

Now Congress is starting to talk about setting limits again. Rep. Louise Slaughter, D-NY, writes that she plans "dramatic legislation that would cap annual credit card interest rates at 16%," alongside Reps. John Tierney and Michael Capuano, both D-Mass, "as soon as Congress returns from Thanksgiing break."

16% is a little more than today's industry average, and about half what card banks charge people with damaged credit. The "Renewing America's Committment to Consumers Act" would also limit late and annual fees, and allow states to enforce stricter laws.

"A great way to help Americans would be to again put a reasonable cap on ridiculously high credit card interest rates," Slaughter says in a statement. "Things were a lot better for the average person in this country when we had usury caps. Watching how credit card companies have exploited people by increasing rates up to 30 percent and more is criminal and this bill will allow us to put an end to this practice."

Would a ban result in fewer desperate people borrowing money they can't afford at high rates of interest?  Or would it just give ultra-high-interest payday lenders and Larry the Leg-Breaker new customers, at banks' expense?  
Posted by Joseph N. DiStefano @ 11:57 AM  Permalink | 2 comments
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  • Comment removed.
  • 0 like this / 0 don't   •   Posted 9:16 PM, 11/25/2009
    Definately a good idea...something that should have been included in the Stimulas packages before banks were bailed out. This is a Bill that needs to be passes. Right now people are getting raped by Banks and Credit Card companies. The whole idea of using a credit based system for jobs, loans, insurance is just down right criminal. What does your credit score have to do with you job or your car insurance. Nothing. Change this practice now.
    — engine84


2 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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