In 2009, Congress passed a new law adding regulations to the credit card industry. Many argue it was too little and too late, but the law did force the credit banks to give a 45 day written notice before they could elevate your interest.
Just prior to the laws implementation, many credit card banks raised their credit card user’s rates. Many increased the rates as high as 30% or more. My sister called me last night and informed me she had several credit cards with interest rates at 30%. High interest rates in 2011 are still the rule.
One of the major contributing factors to individual bankruptcies is credit card debt. Prior to 1980, the credit card banking industries were heavily regulated. Usury rates were regulated by both the federal and state governments.
The term usury comes from Latin and was originally defined to mean interest on a loan. After interest became acceptable, the definition of usury changed to mean the interest charged above the rate allowed by law. Today the term refers to charging an unreasonable or relatively high rate.
Each state has its own usury laws designed to establish a limit as to what is reasonable and unreasonable for loans. In North Carolina for example, the usury rate has a cap if the debt is less than $25,000, it is the greater of 16% or 6% above six month U.S. Treasury bills. If the debt is more than $25,000 or is a mortgage loan greater than $10,000, there is no cap on the interest.
Interest rates have been tumbling since the early 80’s, and it would appear there is no relationship between high interest and bankruptcies. That perception, however, is misleading. In 1980, the Federal Government passed a special law allowing national banks to ignore state usury limits and pegged the rate of interest at a certain number of points above the Federal Reserve discount rate.
In addition, specially chartered organizations like small loan companies and installment plan sellers have their own rules. In most states the usury laws do not have enough teeth to regulate credit card and certain bank debt. As a result, the credit card and banking industries have been left to themselves and the market for regulation.
The maximum interest rate the Federal Government allows is 24%. Do you realize that if you have maxed out a $16,000 limit on a credit cardand pay the minimum of $320 per month, on a 24% loan you would never pay off the principle?
Bankruptcy is defined as a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Many people have over extended their credit cards and no longer have the ability to pay off their creditors. Therefore, high interest rates can cause bankruptcies.
Due to the deregulation of the credit industry, banks, over the counter securities and other financial institutions and entities, creditors have made it all too easy for the average American to get in debt. There were over 1.4 million personal bankruptcies filed in the United States last year, almost a 300% increase from those filed in 2006.
If you have high credit balances with exorbitant interest rates, talk to a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan areas of Charlotte, Gastonia, or Rock Hill, North Carolina, contact us at www.betterbankruptcy.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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