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Interstate Commerce of Usury Rates or "Home Rule" Advantage

Updated on October 8, 2011

Because of the Supreme Court decisions in Marquette and Smiley, [1] credit card issuers can offer products based upon usury laws in the states in which they have an established presence then “export” those usury rates to consumers across the country and charge additional fees (such as late payment fees and interest rate hikes) for loan products. Capital One is a McLean, Virginia based company. The State of Virginia has a complicated usury law in place, allowing lenders to establish whatever rate they wish to charge with whatever membership fees they can obtain under the provision that a written contract agreed to by the parties trumps usury law rates. [2]

As an extreme example, First Premier Bank (a South Dakota company [a state in which no usury law exists on written contracts [3]]) was cited as late as December 2010 for charging customers 79.9% interest on credit cards with as low as $300 limits. [4] “As of [October] 2011, Premier Bank is offering a credit card with a 49.9% [5] interest rate and a $300 limit. Additionally, it requires a security deposit of $95, and a $75 annual fee the first year.” Id. Arguably, this equates to a 74.9% interest rate when taken as a whole (49.9% on any balance plus 25% on the “line of credit” offered [$75 annual fee divided by $300 = 25%] – note that the 25% is charged against the account regardless of whether or not the account holder actually has a balance).

Until there is a federal usury law in effect (which would trump these "predator" states), consumers are beholden to the whims of the issuing lenders’ state “home rule.” (See Usury Laws [6] by State for each state’s currently established usury rate for lenders with “brick and mortar” presence within each state). The House and Senate have refused the enactment of any such law for years (both Democrats and Republicans). The establishment of the Consumer Financial Protection Bureau [7] signed into law by Obama would to thwart these practices completely withdrawn from the lobbyist influences of Wall Street and the bureau’s budget carved from the Federal Reserve to keep Washington lawmakers from “starving” it of funding (thereby rendering it ineffective) and paid for by the banks, not the taxpayers.

Lawmakers (most notably Republicans), however, have fought the appointment of ANY director to the bureau and have kept the Senate open in “pro forma sessions” [8] to keep Obama from appointing a director during a recess. [9] This delay has prevented the Bureau from effectively “opening its door” to begin work on consumer protection reforms. House Banking Committee Chairman, Spencer Bachus (R-Ala.), has stated that a commission was preferable to a single director whom he referred to as "an unaccountable czar" given "unmitigated discretion to issue rules to ban financial products." [10] (Note that Bachus, Chairman of the of the House Financial Services Committee, has received $37,000 in campaign contributions from Capital One to fight such legislation [11] (and COUNTLESS other financial industries) and is notably quoted as saying, “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks[12]).

Note it is the Republican/TEA party attempting to “starve” regulatory agencies by “paring down government” at a time when regulation is needed most. [13] It is also the Republican/TEA party that is stalling the enactment of any regulatory laws against financial institutions, caps on corporate pay, and derivative pay structures (that 15% tax rate discussed in Capital One and Tax Evasion [14]) while receiving the most from financial corporations in contributions and lobbyist expenditures against regulating the corporate self-interest. Financial corporations are also ramping up campaign spending through “non-solicited” political advertisements favoring or opposing candidates to various political office (see the U.S. Supreme Court case holding “corporate personhood” and the unlimited monetary freedom of political speech through “unsolicited” campaign ads [Citizens United v. Federal Election Commission [15] [Summary Discussion [16]]).

FOREWARNING: WITHIN 60-DAYS OF THE 2012 ELECTION CYCLE EXPECT A BOMBARDMENT OF POLITICAL ADS. PLEASE FACT CHECK ANY POLITICAL SPEECH ADS THROUGH POLITIFACT [17](A NON-PARTISAN BS METER OF THE TRUTH IN POLITICS). PAY CLOSE ATTENTION TO THE LIAR ADS AND SPREAD THE WORD. Although most Americans are not dumb, when a conglomeration of a sector of extremely “rich” corporations who have a “self-interest” verses the Country’s “best interest” at heart and outspends the "people," the advertisements will be lopsided and untruthful (especially against political candidates who threaten the financial industry [think Elizabeth Warren’s [18]Senate campaign]).

That being said, THANK YOU "OCCUPY WALL STREET" for doing your part to make sure Washington, Wall Street, and the PEOPLE know that the "people's" voices WILL be heard.

For related topics, please see the author’s other HubPages articles.


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[11] financial/78530e03ddd14981a99c383bdfde59ec?cycle=-1


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