When Sen. Bernie Sanders, I-Vt., in May tried to get a 15 percent limit on credit card rates added to a bill imposing new regulations on the industry, the amendment only received 33 votes—and only one from a Republican.
That defeat, though, has not killed the movement to put laws against usury back on the books. In fact, a grassroots movement is moving even more audaciously than Sanders, using the Old Testament and the Quran as inspiration. The idea is simple: “10 Percent Is Enough.”
The movement is being led by the Metro Industrial Areas Foundation, an offshoot of the national Industrial Areas Foundation founded by Saul Alinsky in 1940. Its communications director, Ari Lipman, was the Campaign for America’s Future’s first Maria Leavey Tribute Award winner.
According to indexcreditcards.com, the national average credit card rate was 14.94 percent, an 18-month high, but rates in excess of 25 percent are not uncommon. A June article on ConsumerAffairs.com includes the complaint of one Bank of America customer who saw his credit rate jump inexplicably to 27.99 percent, even though he had not had a late payment in four years. A similar story of banks jacking up rates, in anticipation of the upcoming law cracking down on abusive credit card practices, appeared Monday in the Chicago Sun-Times. In addition to the rates themselves, banks are imposing higher fees that can be especially devastating on families living on the financial edge.
Can banks manage a profitable business with a 10 percent cap on interest rates? The 10 Percent Is Enough coalition says "yes." As one of their fact sheets states:
Until laws against usury were repealed three decades ago, interest rates were capped, with some exceptions, at 9%. Before 1980, in the context of these caps, banks had somehow found ways to operate profitably. What is new is the repeal of these limits.
Since 1980, the nation operated without financial speed limits or DUI standards. In this new hit-and-run economy, tax preparers provide rapid refunds to consumers, for a fee that, when calculated annually, can approach an annual percentage rate of 100%. Credit card companies sneak additional fees, often at exorbitant rates, into the bills of borrowers who keep zero balances. Between March of 2007 and February of 2008, 70 million American card holders experienced increases in finance charges. Interest rates of 25%, 35%, and higher are common. Without any fiscal restraints, with this mix of high interest and high fees uncontrolled, the predictable has occurred: collisions and crashes and incalculable damage done to families, communities, and country.
The coalition has already launched protests in several cities, including Washington. On Monday, The Guardian in London reported that the group has succeeded in getting a meeting with UBS bank officials on Thursday.
Usury laws were among the first casualties of the deregulatory era championed by conservatives. It is an era that has profited financial firm executives handsomely but has trapped millions of consumers in a quicksand of debt, not only at the hands of the nation’s banks but also at the hands of even more nefarious payday lenders. A recent report from the think tank Demos makes clear why this is a critical issue. The report notes that the average credit-card debt by low- and moderate-income families in 2008 was up to $9,827, a consequence of families coping with a 27 percent increase in living expenses since 2000 while their wages in real terms remained stagnant.
At a time when banks, at a cost of less than 1 percent, can obtain the money that they then lend out in the form of credit card loans and other forms of consumer credit, it is not too much to ask the smart leaders of our financial institutions to do business, and enjoy their profit, with the remaining nine-percentage-point margin.