Credit card interest rates should be capped for the same reasons we have laws to make sure the food supply is safe and why we have seatbelts in our vehicles. It is all about consumer protection. It is just that simple and laws about our credit “products” are no different. I recently noticed another bill was put before Congress to legislate at the federal level interest rate caps on creditor cards for consumers. Maybe this time the law might actually get passed and signed. I have written all kinds of articles about how we need credit and short-term loan reform in a number of areas. I am hopeful, but I doubt any real progress will be made in the near future to limit taking advantage of people that need short-term loans to pay for food or housing. Even as a bankruptcy attorney I have advocated for years to legislate protection regarding debts………
How Did We Get To 30 Percent Interest Rates To Begin With?
Each state has usury laws to protect consumers from unreasonable or unconscionable interest rates and contracts. I have previously discussed “Why Are Credit Card Interest Rates So High” given there are state usury laws that are supposed protect consumers from unconscionable interest rates. Big business can easily find all kinds of ways to skirt existing legislation or change protections that protect individual consumers. I could list hundreds of examples and it is nothing new. It is unfortunate that over the years it has just become worse and worse to the tune of millions of dollars in disparity. We just see higher and higher shameless interest rates.
Payday Loans and Title Loans
In a prior article I wrote: “Why Payday Loans and Title Loans Need More Regulation and Not Less.” I used the term loan shark not less than twelve times. It is just the truth and why and how can this continue? In this particular article I mention how there are laws to make sure there is no price gouging in the event of a natural disasters given people are vulnerable at that time……… These laws are protections resulting from a natural disaster. For some reason we do not want to protect consumers when they have a personal disaster whether in their control or not . . . . .
The lending and credit practices in place right now are absolutely loan sharking and should be illegal period. In the meantime let us discuss how things have run amuck.
I have also questioned and complained about “How Can 1,000 Percent Interest Be Legal?” Well it should not be period.
Why Are Unconscionable Contract Laws Not Enforced
Arguably, or just my opinion, most payday loans, title loans and potentially credit card agreement terms are unconscionable contracts. In California we have Civil Code Section 1670.5 providing that if a part of a contract or contract is found to be unconscionable the court may refuse to enforce the provision of the contract or contract. Proving a contract is unconscionable is no easy task but generally the contract is overly harsh, unduly oppressive or unfairly one-sided. Unconscionable contracts are agreements that are unreasonably favorable to the credit card company or bank given they are clearly the more powerful party in the transaction. Contracts or agreements that are overly harsh or unduly oppressive or are so one-sided as to shock the conscience should not be enforced. Again, arguably 20-30% interest shocks the conscience. Can we not agree that 1,000% interest is shocking? What is the limit? In some industries there is no limit on mark-up of goods or services. In our system the market is supposed to determine price of goods or services. At the same time there are all kinds of examples of regulation that manipulate market conditions to the detriment of some parties and the benefit of others. It is very difficult to agree on what is right or wrong, but can we all agree that we as consumers are supposed to have protections from parties we have no bargaining power with……….
Regulation For A Safe Food Supply
No one really complains about regulations that ensure our food supply is safe from production to sale. We all actually take it for granted. If we have more financial regulations to ensure the safe distribution of borrowed funds is it so different? Nope. They are just different industries and products. We need better regulation to ensure safe borrowing for the benefit of consumers. People are getting sick on bad meat (bad credit agreements) and it is not okay.
Capping Credit Card Interest Rates [AGAIN] Is A Great Start
I cannot say this about all laws that are changed, but generally how we treat many circumstances under the law have been developed over hundreds of years of trial and error. As a bankruptcy attorney there has been some form of debt relief by law, Bankruptcy Code, to obtain the discharge of personal liability of debts. We have modified the Bankruptcy Code over time but never entirely done away with it. Do you think debt and credit is something new? It is not. There is absolutely nothing new about one party as lender and another as the borrower. Why cannot we not learn from history so we are not doomed to repeat bad history? We more or less have done away with interest rate caps even though for hundreds of years under state usury law we capped interest rates to protect consumers. I ask you what has changed to warrant eliminating caps on interest rates? If there anything? Is there no more capitalism with a conscience possibly?
I see capping credit card interest rates like legislating that cars must have seatbelts or regulation to ensure safe food supply. It is just that simple.