Wednesday, April 01, 2009

Time To Regulate Credit Card Interest Rates

The Obama Administration has used every means available to impose tighter and tighter regulations on companies receiving Stimulus Funding. In the financial industry, they have sought to limit executive pay and eliminate bonuses. In the automobile industry they have used federal assistance as leverage to restructure General Motors, even ousting officials elected by General Motors’ stockholders. Most recently, some in the administration have suggested the government should regulate salaries of all executives in all industries. But one thing they haven’t sought to regulate is credit card and consumer loan interest rates.

Over the past twenty years, the banking industry has lobbied for increasingly favorable rules controlling the interest rates they are allowed to charge for credit card debt. As a result, in some states interest rates are unlimited. In addition, banks and credit card issuers are permitted to tack on fees and late charges and they are permitted to increase interest rates for customers who, though current at the time, fail to meet certain criteria not directly tied to their account.

Not satisfied with that, in 2005 after years of intense lobbying, banking officials convinced Congress to tighten bankruptcy laws to prohibit consumers from liquidating credit card debt. Now that many in the financial industry have run the banking sector into the ground, imperiling the U. S. and the world, these same companies turn to Congress for assistance.

In the past 12 months, the federal government, through one agency or another, has pumped trillions of dollars into the banking industry. Banks have received generous injections of capital, either through the sale of preferred stock or loans from the Federal Reserve, at all but an interest-free rate. Every dime of that money is taxpayer money. If banks get all of this free of charge, why are consumers forced to pay usuriously high interest rates?

No comments: