Credit Card Interest Rates
Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299 (1978). In a unanimous U.S. Supreme Court decision, the court held states anti-usury laws regulating interest rates unenforceable against nationally chartered banks based in other states.
Justice William Brennan: It was the intent of Congress when it passed the National Banking Act, nationally chartered banks would be subject only to federal regulation by the Comptroller of Currency and the laws of the state in which they were chartered, and that only Congress or the appropriate state legislature could pass the laws regulating them.
This was one of the more important decisions by SCOTUS as it allowed banks chartered in one state to have the same interest rates in other states, offer credit cards nationally, and beat out the bank competition in other states who might be subject to stricter regulations.
At the time Justice Brennan felt congress would act to allow states to have more freedom in regulating banks within their borders by changing the National Banking Act. “This impairment may in fact be accentuated by the ease with which interstate credit is available by mail through the use of modern credit cards,” he allowed. “But the protection of state usury laws is an issue of legislative policy, and any plea to alter [the law] to further that end is better addressed to the wisdom of Congress than to the judgment of this Court.”
Of course, it did not happen. And who said Congress had any wisdom or care for their constituents?
Perhaps, someone can point to another time when Congress has altered the National Banking Act. The only other time I can recall was when Congress repealed Glass-Steagall and altered the National Banking Act to allow Sandy Weil’s Citibank to acquire Travelers Insurance and move into investing on Wall Street.
More recently, Bernie Sanders has introduced new legislation. In the past, Bernie had introduced legislation in 2009 to cap interest rates which went “no-where” quickly. There are probably other Senate or House members who have also attempted to cap interest rates and ran thee banking gauntlet opposing any such change to their usurious interest rates and other charges.
In a joint statement;
“The American people are sick and tired of being ripped off by the same financial institutions they bailed out ten years ago. If we are going to create a financial system that works for all Americans, we have got to stop financial institutions from charging outrageous interest rates and fees.”
Both Senator and Presidential Candidate Bernie Sanders (I-VT) and Congressional Representative Alexandria Ocasio-Cortez (D-NY) are teaming up on a bill to cap credit card and payday loan interest rates at 15%. In some cases, this is 50% lower than what is being offered today for what is termed as riskier loans or short term payday, etc. types.
Moving on and considering other presidential candidates who may have a difference of opinion than Sanders. It is no secret Delaware Senator Joe Biden has been a big supporter of banks since the seventies and has sponsored and helped to put into play many new laws which prevented students from getting relief or declaring bankruptcy to them from the signature loans made to them. When then President Obama spoke out against credit-card lenders calling them “‘outrageous’ and ‘looked forward to reviewing additional legislation that caps interest rates,'” VP Joe Biden was silent on the issue. Joe knew which side his bread was buttered on then and for that matter today also. Constituents can expect no help from Joe Biden.
When a similar bill capping credit card interest rates at 15% was introduced, half of the Democrats joined Republicans in 2009. It lost 60 to 33. This gives you an idea of how deep the politics run between Banks and the conservative Republicans and Democrats. Consider for a moment how long it took for either party to make this an issue or at least one party. Since 1978 . . .
In particular, I am eager to see how Joe Biden responds to Bernie Sanders proposal to cap interest rates. “Biden is more reliant on the kinds of big donors and high dollar events Democratic primary voters frown upon.”
Run75441 (Bill H)
Reading along I found myself stuck on an editing choice. Why is no-where in quotes? Moving on…
If you’re really eager to know how Biden responds on this, prediction comes pretty easily. If he addresses consumer debt at all it will be through an arcane means tested formula and process that takes 45 minutes to explain and 3 years to understand (when the understanding comes, it will reveal that his proposal delivers nothing… Kind of like the ACA in that way).
No, Joe. Just, No.
AS:
“no-where” quickly means for me it is so typical a cap on interest rates would go “no-where” quickly. I expect the same for this proposal also. I also expect the same for the Durbin-Sanders-Nadler proposal. A lot of noise and no-go. The proposals will die fast on the sidelines.
Just human nature. uh huh.
I remember this.
To be fair about it at least we know what it will take to get Biden on board Bernie and AOC’s bill: They need to get out there and start bundling.
AS:
What needs to happen is a massive movement by Millennials to his door step. They could take him down quickly. They are the largest contingent of voters out there now. Why would anyone trash them? Biden is not that impressive. Here is how Wiki describes him:
“Biden received student draft deferments during this period, at the peak of the Vietnam War, and in 1968, he was reclassified by the Selective Service System as not available for service due to having had asthma as a teenager. He never took part in anti-war demonstrations, later saying that at the time he was preoccupied with marriage and law school, and “wore sports coats … not tie-dyed.”
So, he did not serve. Not a big deal. At least he did not have heel spurs. Did not do the anti-war thingee . . . did he have an opinion? The last comment is a clincher and reveals his views “wore sports coats … not tie-dyed.”
He goes on to trash Millennials for not being involved. He did a sit in once. Other than this, what else did he do? Others may disagree with me.
I think the argument for unlimited interest rates has more to do with payday type lenders who are the only ones who will lend to those without collateral. Isn’t it probably true that credit would dry up for them under a 15% cap?
Capping interest rates will lead toward debt contraction as the system would weaken. fwi, Jack made my point above.
It is probably a good time to revisit thoughts on blockchain currencies …. Unlike 17th century tulips. there is great utility in their use … Near the fractal end of US hegemony saturation macreoeconomics … the ascension of blockchain currrencies will provide some global excitement ….
Gary:
I have at times thought on the subject of transactions and the whys of the costs involved in a computerized system which takes microseconds (if such can be the length) minus labor to transact. Too many people or institutes own a piece of it and are tolling gates in the process.
For those here, the current financial system operates a bit differently than what it used to operate with respect to what is seen in the movie “Its a Wonderful Life.” Jimmy Stewart pulls some money out of a drawer gives it to Ernie who walks it down to Mr. Potter’s bank. On the way h loses it. The system then had numerous costs tied to it. Even today we operate in a similar manner in transmitting to various silos transactional information.
What Gary is referring to is a system which allows digital information to be distributed and not copied from a centralized data bank. A time-stamped series of records of data that is managed by cluster of computers not owned by any single entity. A block chain has no transactional cost like what we see today in our financial system. Banks are cut out of the chain of transactions.
Systems do not cost money in the way they are handling transactions today. There are to many points of entry which toll takers are exacting their fees when the transaction itself could be managed by a buyer and seller itself in the system with the transaction recorded within the system. Blockchains transfer and store money and it can also replace all processes and business models which rely on charging a small fee for a transaction.
This is a simplified version of it and reminds me of a data file for managing inventory within a corporation rather than separate silos or files requiring interaction by a third party. I suspect the financial system could handle such now except for the profits which they would have to forsake to achieve the is system.
Even a 15% cap is too high when we are talking about transactions. Interest rates are paying for the system one would see as portrayed in Jimmy Stewart and Mr. Potter’s banking system.
Sorry, I was tired last night.
When I typed “payday loan rates tx” I learned that the average payday loan costs 439%. Over 100%/quarterly. I also learned that my fellow Texans borrow using payday loans at a rate 3% higher than the national average.
If you’re lending money at a rate that doubles the debt in less than 90 days you’re not providing a service you’re compounding penury with debt slavery. It might be legal but it’s not right.
@amateur socialist: I agree it’s not right; what’s also not right is the inability of the poor to finance anything because they have no collateral and their insistent need for money to survive. If not payday lenders, what?
Jack, if you imagine loans at 439% APR being enclosed within a domain you still want to call “finance” I don’t think there is much more to be said. It’s not finance it’s pure exploitation. I’ll leave you to it.
And veering back to Run’s topic, I see uncle Joe tagged as the “Safe Choice” in a new SC poll. https://www.postandcourier.com/politics/the-safe-choice-biden-widens-sc-lead-in-democratic-presidential/article_f727895c-731f-11e9-888a-af4280777b2a.html
Safe for Trump’s 2nd term.
AS, I’m not arguing it’s not exploitation. I’m simply saying, if not that for the poor, what? They should just do without?
@ 439% interest they’re probably better off joining the lenders and just engaging in wholesale fraud/theft. No borrower pushed to that extreme “survives” for long.
Suggested reading: “Little Dorrit”, Charles Dickens.
Perhaps another question is in order: What if society were structured and regulated in such a way that people’s survival wasn’t priced based on their desperation?
That would be nice. Dream on.