What happened to the Congressional investigations regarding usurious credit card practices?

Americans keep being put between a rock and a hard place by the greed of banks with no relief in sight.  Not only does Main Street pay for Wall Street’s bailout without seeing any relief  from bone crunching mortgage payments, at the same time they are being toppled by credit card debt with no limits placed on fees or interest charges.  And the Secretary of the Treasury and Federal Reserve Chairmen scratch their heads and wonder why the economy remains in stagflation?

Yes, some home mortgages have been refinanced, but the banks include missed payments (and probably any fees and interest incurred by those nonpayments), resulting in a higher mortgage payment than before.  If the homeowner could not meet the monthly mortgage payments before, how can a higher payment help?  Folks, this is not rocket science!

Then add credit card charges and interest rates that have no caps to a credit card balance, conservatively 1 in 20 taxpayers carry with an average owed of $9,ooo, and you have another bubble waiting to burst!  Congress began addressing this issue prior to the foreclosure and economic collapse by  holding hearings with testimony from individuals affected directly by these bank practices, but with little or no results.

Banks and other financial institutions have circumvented state regulations with regard to open end credit beginning in the 1970′s by transferring credit card operations to close end credit.   Although misnamed, open end credit actually in some states had a cap at 12% in the early 1970′s.  Credit lenders lobbied to raise that to 18% and were supported by some notable congressmen as the late Senator William Proxmire (D-Wi) later the Chairman for the Senate Committee on Banking, Housing, and Urban Affairs.  I know, I was in a meeting with him in 1974 along with lobbyist Jim Johnson, yes the same, who at the time was representing retailer Dayton-Hudson Corporation.  He agreed with the retailers that retailers and others needed to have the open end credit raised to 18% at that time.

Not satisfied with this rate, nor the fact that it could be set by the state, retailers began to convince customers to open closed end credit accounts.  Closed end credit cards were not governed by law and historically had a reputation of interest rates individually set by store owners that ranged from 22%-50%!  Typically you would find such accounts being offered  by local businesses in the poorest neighborhoods, including grocery stores.   Although horribly unjust, these were usually small amounts and charged to customers who normally could not get credit for whatever reason.  This doesn’t make it right, but the scope at the time was fairly limited.  However, once discovered by major retailers that there was a line of credit that retailers and their financial institutions could offer that did not have a cap on the interest rate to be charged by them, the race was on.

One of the first retailers to go this route was Sears Roebuck.  Now you may ask, how could this line of credit be sold to the average customer when the open end line of credit was available.  Simply by offering the customer a lower monthly payment.  Like so many of us purchasing cars and homes, we look at whether or not we can afford the monthly payment.  With open end credit, the monthly minimum payment fluctuated with the amount of the balance.  With closed end, you paid the same amount each month–the rub is that a minimum payment, depending on the amount owed, could mean–yes, that’s right–paying it forever!  As the interest charges mounted, the balance kept increasing.

With yhe advent ofnew technologies such as electronic charging and payments, banks and other financial institutions got on-board with the retailers wanting a piece of this lucrative pie where there were no limits on interest rates.  In fact, they were able to write in the fine print of the credit card agreements, the ability of the financial institutions to change the interest rates at anytime the customers credit rating changed, a missed or late payment, or in the case of CitiCorp when these hubris financial institutions need more money to bailout their institutions from poor investment decisions.  All increases made with only a perfunctory notice of  the rate change to the customer.

Additionally, the ability to charge fees according to what the market will bear, and unchecked by government, have co-opted sound banking practices for GREED. Faced with such insurmountable debt, citizens are buying less and no wonder that retailers are hurting however,in many ways, they brought it upon themselves.

It’s time for Congress to get back to investigating this credit crunch faced by citizens like you and me.  This is even a greater bubble waiting to burst upon the economic scene since it involves not only homeowners, but renters as well–in short, everyone. And it does not require a bailout at this time, only a capping of the interest rates that can be charged, and rolling back fees and other usurious charges.

This is a call to arms to write your governmental leaders to once again take up this issue and to find some relief before this bubble bursts upon the current economic scene!