Congress needs to cap credit card interest rates
In his Pulitzer Prize-winning book, “Freedom from Fear,” author David Kennedy quotes Herbert Hoover, the champion of laissez-faire capitalism, as stating on the eve of the Great Depression, “The trouble with capitalists is that they are too damn greedy.” Nowhere is that better exemplified than in the usurious interest rates that currently are being charged on retail credit. The American economy, dependent on consumer spending for 75 percent of its success, is suffering from the sin of usury.
Congress must act to ban usury because the power of the states to do so was removed by a misguided Supreme Court decision. In the 1980s and 1990s, before that decision took effect, the economy boomed because consumers were able to pay for products and services at low interest. In New York, interest was capped at 16 percent and most people could pay for purchases over time at 8 percent. In fact, the economy was so robust that, to control inflation, Congress in 1986 repealed the deductibility of retail interest.
Today, however, there are no caps on interest. New cards are issued at 22 percent. A late payment causes rates to soar above 30 percent. Payday loans trap people into paying interest as high as 400 percent. Usury has created a debtor class that is unable to buy products because its money is spent paying high interest. Those who historically were able to buy on time are intimidated from doing so. As a result, the economy languishes. If people don’t buy, people who provide products and services don’t work.
To restore a robust economy, Congress must cap interest rates on credit cards at the level rates were when the economy was robust. It’s that simple. All you need is a sense of history. Ending the sin of usury should be a campaign promise by candidates on both sides of the aisle.
Gabriel J. Ferber