I just got an email from one of my credit card issuers urging me to hurry and buy stuff because I\u2019ll only have to pay 5.99% interest, but if I wait, I\u2019ll have to pay the regular rate of 30.49%. I should probably pay more attention to such things, but I can\u2019t remember the last time I carried a balance on a credit card. I only pay attention to paying the monthly statement in full before the due date. I remember when there were laws that capped the rate of interest on credit cards. I don\u2019t remember the cap, seems like it was generally around 12.5%. These were state consumer protection laws, so they varied a bit from one state to another. There weren\u2019t limits on commercial debt, it being assumed that business people were financially savvy and if they were greedy enough to charge, and stupid enough to pay, 30% interest on a loan, they should be free to do so. Consumers, on the other hand, needed protection from such greed. Who decided they didn\u2019t? Isn\u2019t it pretty obvious they still do?<\/p>\n\n\n\n
At some point, banks discovered that South Dakota didn\u2019t have such a law, and they began rushing to get charters there so they could issue their cards from that state and charge whatever interest they wanted. Ultimately, the other states saw how much banking business they were losing out on, and they did away with their laws.<\/p>\n\n\n\n
There\u2019s a concept under the law called \u201cusury\u201d. Basically, usury is charging exorbitant and unconscionable interest on debt. It\u2019s sort of kind of supposed to not be legal. Kansas has long had a usury law. K.S.A. 16-201 sets interest on debt at 10%. However, it goes on to say that this is \u201cwhen no other rate of interest is agreed upon\u201d. If you want a credit card, you\u2019ll agree to 30% interest. In the law we call this an \u201cadhesion\u201d contract. It\u2019s a term for when one party agrees to a contract because they have no choice. Somehow or other, the governments, state and federal, decided that consumers shouldn\u2019t be protected from having to agree to 30% interest because they have no choice. Well, okay, there is a choice. They could choose to try to get by in today\u2019s economy without a credit card.<\/p>\n\n\n\n
Some would argue that if a person can\u2019t pay off their credit card every month, they shouldn\u2019t have one. It\u2019s not really a bad argument. Nevertheless, call me old-fashioned, but I\u2019d call 30.49% unconscionable, even if one has a choice to avoid it by simply not getting a credit card. After I began writing this, I came across an article reporting that Bernie Sanders is proposing federal legislation called \u201cThe Loan Shark Prevention Act\u201d to limit credit card interest to 15%. The article was dated May 16, 2019. Apparently, the bill went over like a lead balloon. I don\u2019t remember ever hearing about it in the mainstream media. In case nobody has ever noticed, I stand in the conservative camp, which generally would put me at odds with Bernie. I think in this case he was onto something I could definitely get behind. I sure can\u2019t get behind his push to forgive student loans, though.<\/p>\n\n\n\n
I have an idea! Instead of forgiving student loans, how about limiting the interest they have to pay on their credit cards to something reasonable like, no more than 5% above prime or even Bernie\u2019s 15%? Think of the difference that would make in their lives. Come to think of it, in all the news reporting about how tough it is on these \u201ckids\u201d to have to actually repay their student loans, nobody has reported anything about how much credit card debt they are also carrying and the interest rate they\u2019re paying on that. Cut their credit card interest by 20% and maybe they\u2019d be able to pay those student loans and not even have to give up Taylor Swift concerts, let alone give up buying a decent starter home.<\/p>\n\n\n\n
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I just got an email from one of my credit card issuers urging me to hurry and buy stuff because I\u2019ll only have to pay 5.99% interest, but if I wait, I\u2019ll have to pay the regular rate of 30.49%. … Continue reading