Modern-day loan sharks disguised in plastic
BYLINE: BERNIE SANDERS
For the Journal-Constitution
DATE: December 3, 2004
PUBLICATION: Atlanta Journal-Constitution, The (GA)
EDITION: Home; The Atlanta Journal-Constitution
SECTION: Editorial
PAGE: A21
Today's loan sharks are no longer lurking on street corners or hiding in alleys,
breaking kneecaps to collect their payments. They now wine and dine with the
president and other powerful political leaders, wear Armani suits, make hundreds
of millions in total compensation and head banks like Citigroup, MBNA and Capital One.
The old-fashioned loan shark was a common criminal who broke the law. The modern loan shark, through campaign contributions and political connections, writes the law.
At a time when interest rates have been historically low, credit card issuers made a record-breaking $30 billion in profits last year
by charging usurious interest rates and sky-high fees. Millions of financially strapped credit card holders are now being forced to
pay 15 percent to 30 percent interest rates and hundreds of dollars a year on late fees and other add-ons. Like the
loan sharks of old, credit card companies lie, deceive and destroy lives in the
process.
Meanwhile, as credit card issuers rip off middle-class Americans through deceptive and unfair tactics, the CEOs are laughing all the
way to their banks. Over the last five years, the chairman of Citigroup (Sanford Weill) made more than $500 million in total
compensation and the CEO of Capital One (Richard Fairbank) made more than $169 million in total compensation. In 2002 alone, the top
four executives at credit card giant MBNA made more than $300 million in compensation.
One of the most egregious ways that these modern-day corporate loan sharks make their bloated profits is through the credit card interest rate ''bait and switch.''
Just check your mailbox today and you'll probably find one of the 5 billion credit
card solicitations (the actual figure) that the companies bombard consumers with every year. What you'll see are attractive offers
promising low interest rates of 4 percent, 6 percent or sometimes even 0 percent.
That's the bait. But, what you probably won't notice is that in the very fine print
at the bottom of a multipage contract written in undecipherable legalese is language that essentially allows the company to raise
their rates at any time for any reason. That's the switch.
Many thousands of Americans are now paying interest rates double or triple what they signed up for. While short-term interest rates
set by the Federal Reserve Board are now 2 percent, many credit card holders are paying interest as high as 25 percent to 30
percent.
Most egregiously, interest rates are soaring for consumers even when they fulfill
their end of the contract and make all their monthly payments on time. How does this happen? Maybe you were one day late paying a student loan three years before you obtained your
credit card. Maybe you bought a new home. Maybe you committed the crime of taking out a loan
to pay for a medical emergency. Or maybe you did nothing at all. It doesn't matter.
Even if you have always paid all of your bills on time, the credit card issuer can
raise your interest rates at any time for any reason. Unlike fixed mortgage rates,
there is no such thing as a fixed credit card interest rate that you can depend upon. Further, there have been outrageous increases
in late fees that have cost consumers billions of dollars.
Last year, Congress had the opportunity to support a bill that would end this ''bait and switch'' scam. Unfortunately, the banks and
credit card companies, with their millions in campaign contributions, constitute one of the most powerful lobbies on Capitol Hill and
were able to prevent any serious legislation on this issue from being passed. But consumers and their representatives in Washington
must not give up.
The middle class of this country is struggling hard to keep their heads above water economically. Unemployment is high, good-paying
jobs and pensions are disappearing, and health care and college education are becoming much more expensive.
In order to survive, many families are forced to borrow. The result is that U.S.
consumers are now $2 trillion in debt and a record-breaking 1.6 million families went bankrupt last year, an increase of more than
125 percent since 1989.
Loan sharking is an odious practice, whether it is performed by street-corner thugs or the CEOs of large banks. Charging economically
vulnerable Americans outrageous interest rates and fees is simply not acceptable and, amid all of the recent political discussion
over ''values,'' this certainly does not constitute ''moral'' behavior.
The time is long overdue for Congress and the White House to stand up for American consumers, take on the modern-day loan sharks and
end the credit card ''bait and switch'' scam.
Rep. Bernie Sanders (I-Vt.) is the author of the Credit Card Interest Rate Bait and Switch Prevention Act.
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