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Loan Sharks in Three-Piece Suits

   Date: 03/10/2009

Sen. Bernie Sanders will introduce legislation this week to cap interest rates charged by credit card companies that now slap consumers with rates of up to 30 percent. "This is money that comes right out of their hides and it hurts," Sanders told The Burlington Free Press. His legislation would impose 15 percent interest rate ceiling. It also would limit fees. “We are going to introduce a national usury law which will prohibit any financial institution from charging these outrageous rates,” he told Thom Hartmann’s nationally-syndicated radio show.  “These loan sharks wear three-piece suits, but they’re not much different than those guys who break people’s knee caps.”

At the same time that banks are receiving the largest taxpayer bailout in U.S. history and at the same time that the Federal Reserve has lowered short-term interest rates that banks pay to near zero percent, the same banks are charging consumers outrageous fees and sky-high interest rates on credit cards and other loans. 

Citibank, Bank of America, Wells Fargo, and American Express recently notified customers that their interest rates are going up, in some cases to 30 percent, if a single payment is missed.  They also are jacking-up interest rates on consumers who pay their bills on time and never go over their credit card limit. 

The 15 percent cap on credit card issuers is the same limit Congress imposed on credit union loans almost 30 years ago.

“Most lenders have declined to say how many customers have been hit with higher rates. But consumer advocates place the number in the millions,” according to Los Angeles Times columnist  David Lazarus.

“The crappy economy means default rates are rising for card issuers and could hit a record 10 percent this year, but it seems like a decidedly shortsighted approach to punish those customers who still pay their bills and haven't shown themselves to represent any greater risk,” Lazarus wrote.

To read Dan McLean’s article in The Burlington Free Press, click here.

To read David Lazarus’ column in the Los Angeles Times, click here.

To watch the senator talk about his bill, click here.

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