In 1978, the Supreme Court made a ruling that would change the face of how banks dealt with credit card interest. The Marquette Bank opinion permitted national banks to export interest rates on consumer loans from the state where credit decisions were made to borrowers nationwide. Existing federal rules required banks to get a formal invitation, issued by the legislature of the state they wanted to enter, prior to establishing operations outside their home state.
It wasn’t long before states like South Dakota and Delaware took full advantage of the new jobs the banks offered for coming to their states. South Dakota’s legislature first passed laws in 1980 effectively eliminating their existing usury laws so Citibank could move their credit card operating headquarters to the state.
Citibank eventually delivered 3,000 high paying jobs to the state that rewarded them with an operations base where they could ignore all the other state’s maximum usury rates and still do business. The state of Delaware followed suit the following year and garnered the lion’s share of credit card companies. Delaware remains the largest home to credit card companies today.
The Federal Government responded by passing weak usury laws allowing a maximum of 24 percent interest to be charged, but it sill allows national banks to ignore state usury limits and peg 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. What does this mean for the consumer? The laws in most states do not have enough teeth to regulate credit card debt.
The Office of the Comptroller of the Currency (OCC) is the Federal Government agency responsible for regulating the credit card industry and has been fighting with the states for years over who has the authority to regulate usury. The OCC has fought aggressively in courts and Congress to nullify state consumer protection laws and curb enforcement actions, sparking a nationwide battle between the states and Federal Government.
The OCC’s actions have severely limited the state and local governments from investigating credit card banks and issuers. As a result, in many instances the only way a person can relieve exorbitant debt from various banking institutions is through filing bankruptcy.
This lack of regulastion has led to complete lender arrogance. Credit card companies prefer customers who will raise their spending limits, pay minimum payments, and not pay on time. If they can charge their customers exorbitant interest, it is even better. One news source claims the industry refers to those who pay their credit cards on time every month as “deadbeats” because the credit banks don’t make any money off them.
There is an enormous profit in high interest rates, penalty charges, and annual user fees for the credit card companies. Since the companies have been able to operate from a few select states, they have evolved into a multi-billion dollar industry.
How do you stop credit card companies in their tracks? Fiing for bankruptcy protection may be one way. If you need relief from the stress of debt and you live in or around the metropolitan areas of Raleigh, Durham, or Chapel 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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