THE CONGRESS, USURY LAWS, CREDIT CARDS AND THE EXCESSIVE FEES YOU PAY

I was really proud of Congress this week: finally holding hearings on Usury - the excessive interest and fees people are forced to pay to their credit card companies.

Or at least they held hearings about the travails faced by the people who pay their monthly payments on time and still get their interest rates and fees hiked.

Even though they play by the rules.

Congress attacked the credit card companies’ greed.

Except the Congress has no one to blame but themselves. And you need to know that.

Back in the middle of the night in 1980, Congress passed a bill that eliminated the Usury Laws. Before 1980, states didn’t think anyone should have to pay more than 18% interest. So they passed Usury Laws, defining excessive interest as anything over 18%.

By the way, the states weren’t doing anything so unusual. Most of the world’s religions forbid usury. Some even forbid charging interest.

However Congress voted to delete the States’ Usury Laws. With one law, they gave the banks and credit card companies permission to charge you anything they like. In interest and in fees. And these days, you’d probably be paying less interest to your friendly neighborhood loan shark than to the companies who issue the plastic in your wallet.

The elimination of usury laws by Congress is contained in the National Bank Act (NBA) and the Depository Institutions Deregulation and Monetary Control Act of 1980.

Until March 31, 1980, when Jimmy Carter signed the bill into law, interest had been capped at 18%. According to Philip Farley, manager of regulations assistance at the Federal Reserve Bank of Philadelphia, "But the lobbyists said it was counterproductive because if rates were too low, lenders would not allow for mortgages or credit cards."

In other words, if they couldn’t make more than 18% on the money they loaned you, they wouldn’t loan you money to buy homes and Christmas presents.

Yeah, right.

Even 18% interest and fees per year can be a major brake on economic growth because that money is not going to buy new goods and services, but to service old debt. Which does not grow the economy (unless you’re the among the top echelon employees of the credit card companies, and your salary and options explode upwards).

In light of my belief that GOVERNMENT'S FUNCTION IS TO PROTECT THE WEAK FROM THE STRONG, I believe it’s time to bring back Usury laws, cap all interest and fees on credit card transactions at a TOTAL of 18%.

And if you can’t qualify for a loan at 18% interest and fees, then perhaps you shouldn’t be using credit to buy things. Perhaps you should save first and then buy it with your savings.

It would cost you a lot less.