Sanders Takes Aim At Credit Card Rate Hikes (Brattleboro Reformer)
Date Posted: 04/28/2009
By BOB AUDETTE, Reformer Staff
BRATTLEBORO -- "Please don't let the credit card companies abuse us anymore. I work hard for my money and I am one of the people that pays their bills and is never late with any of my bills. I cannot afford to have my hard earned money wasted on increased interest rates. Please stop them now ..."
That was just one of the 900 e-mails the office of Sen. Bernard Sanders, I-Vt., received over the weekend after he asked Vermonters to relate their recent experiences with credit card companies.
"At a time when taxpayers are spending hundreds of billions of dollars bailing out Wall Street banks, in response these large financial institutions are saying thanks for bailing us out, now we're going to double your interest rates," said Sanders, during a telephone interview with the Reformer Monday afternoon.
Interest rates are going up for many people, even those who have stayed up to date on all their payments or have excellent credit ratings.
An unjustified raise in interest rates is "unconscionable and an outrage," said Sanders. A recent tax break for the middle class is in jeopardy of being swallowed up by increased credit card fees, he said.
Charging somebody upwards of 30 percent is "loan sharking," he added.
Sanders and four co-sponsors are proposing legislation that would cap credit card interest rates at 15 percent. The reason 15 percent was picked as a maximum rate is because that is the maximum rate credit unions are allowed to charge.
"What has been good for the credit unions should be good for the banks," said Sanders.
In certain cases, credit unions are allowed to charge up to 18 percent.
Reining in the credit card companies is an uphill battle, Sanders admitted.
"This legislation is being forcefully and vigorously opposed by Wall Street and the American Banker's Association, and they have huge amounts of power and money at their disposal."
It's especially egregious because, in an attempt to rescue failing banks, the Federal Reserve recently lowered short-term interest rates to 0 percent.
"These same banks are charging consumers outrageous fees and sky-high interest rates on credit cards and other loans," according to a fact sheet sent out by Sanders. "Citigroup, Bank of America, Wells Fargo and other banks should not be permitted to charge consumers 25 to 30 percent interest on their credit cards while they are getting bailed-out by middle class taxpayers."
One-third of all credit card holders are paying interest rates between 20 and 41 percent, according to the fact sheet.
In the last decade, according to Sanders' fact sheet, the financial sector spent $5.1 billion on campaign contributions and lobbying activities. In 2007 alone, the financial sector employed nearly 3,000 separate lobbyists to influence federal policy making. That's more than five lobbyists for each member of Congress.
Even though no Republicans have signed on to the credit card reform bill, Sanders expects that some sort of legislation controlling credit card fees will pass Congress.
"We're just trying to make it as strong as it should be."
Many of the 900 e-mails have been posted on Sander's Web site at sanders.senate.gov.
"I am infuriated by the arrogance and the utter impunity, evidently legal, by which credit card companies change rates at will," wrote one Putney resident.
"Recently I received a piece of mail more the size of a postcard," wrote a Brattleboro resident. "This notice reminds me that I have the right to refuse the new terms which become effective in May 2009, if and only if I write them a letter which effectively closes my account."
Less clear, he wrote, is the small print requiring balances be paid off in full.
"For me it is distasteful as I have been paying my accounts off well beyond the minimum required," he wrote.