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 have a formal invitation from the legislature of the state they wanted to enter before they could set up 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 and ignored all the other state’s maximum usury rates.
In 1980 Washington began a move, led by the Office of the Comptroller of the Currency (OCC), to peg the rate of interest at a certain number of points above the Federal Reserve Discount Rate. Specially chartered organizations like small loan companies and installment plan sellers would have their own rules. That means that the laws in most states do not have enough teeth to regulate credit card debt.
With states unable to regulate credit card debt, the banks were free to raise interest rates at any level they want, establish minimum payments, and increase the limits of their cards. All of these changes have been designed to get people into debt.
If you put $1000 on your credit card and the company has a 24% APR attached to it with a 2% minimum payment, your minimum payment will never reduce your debt. If you pay $20 a month for the rest of your life, you will never pay off the principal of $1000 worth of credit card debt. The principal amount could be paid-off in a little more the four years at that rate but none of the payment would ever go toward the principal.
In many cases, the only way a person can relieve exorbitant debt from various banking institutions is by filing bankruptcy. Unsecured debt can be discharged in a bankruptcy case.
This personal bankruptcy story was posted on the internet in August of 2011 as comments in a bankruptcy discussion: “I don’t own any luxury items. I don’t try to keep up with the Jones’s. I drive an inexpensive car. I don’t eat out or even have cable TV. I live on a modest budget, yet I owe about $14K on two credit cards. This started a few years ago, when the economy hit my family hard and forced us to live off the credit cards for a few months. Ever since then we’ve been trying to pay off our debt, but the universe seems to be working against us. I haven’t defaulted on any payments yet, but right now the minimum payment is so high that to pay all my bills I have been putting my entire paycheck toward the cards and then using the credit card to pay for all other necessities–basically, borrowing from Peter to pay Paul. As a result, the balance has slowly been creeping up, and I can no longer make the minimum payments.”
Maybe like the debtor in this personal bankruptcy illustration, you have felt the need to use your credit card to make ends meet. Maybe you are paying only the minimum payments in the form of interest on those cards. If this is case, you might be in financial trouble.
If you are bankrupt, you might need a bankruptcy lawyer to help you understand how complex bankruptcy laws may apply to your particular situation.
If you need relief from the stress of debt and you live in or around the metropolitan area of Atlanta, Georgia, 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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