A Federal Agency Wants to Hear Directly from the Public about Bad Practices at Credit Card Companies

Gunnar Larson g at xny.io
Wed Jan 25 07:24:17 PST 2023


By Pam Martens and Russ Martens: January 25, 2023 ~

Yesterday, the federal watchdog agency – the Consumer Financial Protection
Bureau (CFPB) – announced that it wants to hear directly from the public on
credit card practices. But since “the public” also includes all of the
folks that are paid to carry water for the credit card industry, the voice
of the average Joe and Jane is highly likely to be overwhelmed by industry
sycophants, as is typically the case.

Thus, we are asking our readers to give this matter some careful thought,
as we outline below, and if you are so inclined, send your comments to the
good folks at the CFPB using this link they have set up. The public has
until April 24, 2023 to submit comments but we ask that you do so promptly.

Topic 1: The Same Banks that Were Bailed Out by the U.S. Taxpayers in 2008
with Below-Market Rate Loans as Low as Less than Half of One Percent Are
Now Charging those Same Taxpayers as High as 13 to 18 Percent (or Higher)
on Credit Cards

A government audit released in July of 2011 showed that the same mega banks
on Wall Street that caused the meltdown of the economy in 2008 and the
Great Recession were bailed out with cumulative loans from the Federal
Reserve totaling more than $16 trillion. (If you add in the bailout
programs not covered by the government audit and the dollars swap lines to
foreign central banks, the figure comes to a $29 trillion bailout.) The
U.S. taxpayer is ultimately on the hook for the debt of the Federal
Reserve, so those loans were, indeed, a subsidy from the taxpayer.

A significant part of those Fed loans were made at less than one-half of
one percent interest at a time when some of those banks were teetering or
insolvent and couldn’t have gotten loans at even double-digit interest
rates in the open market.

Three of the recipients of those loans – JPMorgan Chase (parent of Chase
Bank), Citigroup (parent of Citibank), and Bank of America – just also
happen to currently have the largest market share of the credit card market
in terms of balances outstanding, according to the 2022 Nilson Report. But
these banks are allowed by the U.S. Congress to currently pay as little as
0.01 percent on the money consumers hold in their money market funds at
those banks while the same banks charge double-digit interest rates on
their credit cards held by consumers. How is the U.S. consumer ever
supposed to get ahead?

This constitutes an enshrined wealth transfer system that is being
institutionalized through inaction by Congress. (Also see our 2021 article:
Citigroup Has Made a Sap of the Fed: It’s Borrowing at 0.35 % from the Fed
While Charging Struggling Consumers 27.4 % on Credit Cards; and our 2022
article: The Apple Credit Card Provided through Goldman Sachs Has Created a
Living Hell According to Consumer Complaints.

Topic 2: The U.S. Needs a Federal Cap on Interest Rates Charged on Consumer
Credit Cards

In 2019, Senator Bernie Sanders and Congresswoman Alexandria Ocasio-Cortez
introduced the ‘‘Loan Shark Prevention Act’’ which would have set a Federal
cap of 15 percent on interest rates that could be charged to consumers.
(Needless to say, it was immediately attacked by the bank lobby and did not

In introducing the new legislation, Sanders and Ocasio-Cortez singled out
the mega Wall Street banks, writing the following in a white paper they
released simultaneously with the proposed legislation:

“Today’s modern-day loan sharks are no longer lurking on street corners,
threatening violence to collect their payments. Today’s loan sharks wear
expensive suits and work on Wall Street, where they make hundreds of
millions of dollars in total compensation by charging sky-high fees and
usurious interest rates, and head financial institutions like JP Morgan
Chase, Citigroup, Bank of America, and American Express…

“Despite the fact that banks can borrow money today at less than 2.5
percent from the Federal Reserve, the median credit card interest rate
today for consumers is an astounding 21.36 percent…

“Jamie Dimon, the CEO of JP Morgan Chase, is now worth $1.4 billion after
his bank got a taxpayer bailout of more than $400 billion during the
financial crisis…

“The American people are sick and tired of being ripped off by the same
financial institutions that they bailed out ten years ago.”

In their white paper, Sanders and Ocasio-Cortez also explained how the U.S.
ended up with such draconian consumer interest rates. They write:

“Establishing a national usury law is not a radical concept. Up until 1978,
about half of the states in the country had usury laws on the books capping
interest rates on credit cards and other consumer loans. For example, in
Alabama, the legal maximum rate of interest was 8 percent. In Alaska it was
10.5 percent. In Arizona it was 10 percent. In Idaho, it was 12 percent. In
Kansas, it was 15 percent. In New Mexico it was 15 percent. And, in
Vermont, the legal maximum rate of interest was 12 percent.

“But, those state interest-rate caps were obliterated by a 1978 Supreme
Court decision (Marquette National Bank v. First of Omaha Service Corp),
which concluded that national banks could charge whatever interest rate
they wanted if they moved to a state without a usury law. So most of these
companies moved to South Dakota or Delaware with no interest rate caps,
allowing them to charge people in Vermont or Kansas interest rates of 20 or
30 percent. That is unacceptable. Under this plan, the disastrous Marquette
Supreme Court decision would be repealed.”

As the saying goes, “Democracy is not a spectator sport.” If you want a
fairer America, you have to engage. We ask that you consider sending your
thoughts on these issues to the CFPB, along with any other credit card
complaints that you have. We also ask that you forward this article to
others you know who are struggling under the weight of credit card debt at
high interest rates.

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