by Sean Gonsalves
The Credit CARD Act of 2009 goes into full effect today, handing victims of predatory lending a badly needed victory. Not complete victory but a win nonetheless.
Jubilee!? Not quite.
Those Wall Street folks are wicked smaht. They've already sniffed out loopholes to get around the law's intent.
PR Watch.org reports: "The new law prohibits credit card companies from raising interest rates whenever they like, on short notice or no notice, and for no particular reason. To get around this, CitiBank mailed out letters announcing it was raising its rates for all of its customers to its bad-creditor rate of 30 percent, and telling customers that they are eligible for a ‘program' that lowers their interest rate back down to the previous rate they had been paying. The only catch: if they miss a payment their rate will zoom back up to 30 percent immediately and retroactively -- exactly the kind of behavior the law sought to end."
Of course, none of this would be an issue if there was a cap on credit card interest rates. But you won't find it in the bill (except for active military personnel), which, if you'll excuse my crusty ole conservative curiosity, makes me wonder what ever happened to the immorality (and illegality) of usury?
Given the numerous verses in the Bible explicitly forbidding it -- far more than all the scriptural references to abortion or homosexuality added together -- you'd think in a "Christian" society, with so many politically-engaged self-professed Bible-believers, usury would be a hot button issue.
The Prophet Ezekiel, for example, declared usury an "abominable thing" and put it in the same category as rape, murder, robbery and idolatry. (Ezekiel 18:19-13).
The Code of Hammurabi instituted regulations for interest-bearing loans. Both Plato and Aristotle considered usury to be immoral and unjust. The Romans had the "Twelve Tables" and capped interest rates at 8.3 percent.
The Quran says "those who take usury will arise on the Day of Resurrection like someone tormented by Satan's touch." Hinduism and Buddhism have also historically frowned on the practice.
And even though modern "conservatives" like to forget it, American civil religion has a long and distinguished tradition of usury prohibition. Adam Smith, the "father of the free-market capitalism" strongly supported the control of usury. While he wasn't against an all-out prohibition of charging interest, Smith argued for a cap on interest rates, thinking it would provide low-risk borrowers involved in socially useful investments access to necessary funds, even with "the greater part of the money...(being) lent to prodigals and projectors (investors in risky, speculative ventures), who alone would be willing to give (an unregulated) high interest rate."
At the founding of the nation in 1776, every state in the Union adopted a general usury law that capped interest rates at six percent. It wasn't until the early 1900s that a concerted push was made to relax usury laws, though the usury-be-damned mentality didn't really hit its stride until the Reagan Revolution, setting in motion a process of deregulation that led us right smack into derivatives, credit-default-swaps, and other "financial weapons of mass destruction" of the lending business, and voilà - the Great Recession.
The bailed-out banking industry could care less, of course. "Imposing interest-rate caps will deny tens of millions of Americans access to credit," says Ken Clayton, senior vice president and general counsel for card policy at the American Bankers Association. "Low- and moderate-income Americans, and small businesses, would suffer. This is exactly the wrong result if you want to increase lending."
Translation: unless lenders can gouge credit consumers, only the affluent will be served.
Whatever happened to usury and interest rate limits? It died in the Senate, just like Wall Street wanted, though it's hard to miss the irony of a "godless" socialist like Bernie Sanders being the one to lead the (unsuccessful) charge in the Senate to bring back that ole time religion. Sadly, it didn't have a prayer.
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