Saturday, May 2, 2009

President Obama, House of Reps. stand up to predatory lenders, Rep. Herseth-Sandlin doesn't

I've blogged several times about the Biblical sin of usury, by which lenders overwhelm borrowers and keep them in debt with excessive interest or tricks of the trade.

On Thursday, the House of Representatives, with President Obama's support, approved a bill to curb some lenders' predatory tactics. The Senate still needs to pass it into law.

The bill would stop a disgusting practice called "double cycle billing", by which credit card companies factor your last month's balance (the one on which you already paid) in with your current billing cycle's daily average balance to jack your finance charge way high (check your credit card - many of the major ones are doing this to you.)

Because South Dakota is home to some significant lending institutions, Rep. Stephaine Herseth-Sandlin (D) voted against the bill. She cited concerns about how restricted credit might hurt the struggling economy and threaten jobs in South Dakota's lending industry.

President Obama has criticized the credit card industry for using hidden fees and other tricks as profit centers. There are both "liberal" and "conservative" critiques of the these practices, as Jay Hancock points out in the Baltimore Sun:

The liberal case for credit-card reform is well known: Greedy banks victimize card users with high interest rates and outrageous fees; Congress must crack down to make the system fair.

Here is the less-known, conservative argument: Credit card complexity prevents users from making rational decisions about borrowing and spending, thus hurting the economy; Congress must intervene to make the system understandable.


The Archer of the Forest said...

I am a registered independent, so take this for what its worth. I certainly have not agreed with some of the things Obama and the Democratic majority are doing, but I wholeheartedly support this initiative. Some of the things credit card companies do is beyond unethical. They are just out of control.

I hope Obama has the wherewithal to go after the Easy PayDay Lenders as well, which are straight up stiff-arm usurers which are even worse and outright disgusting morally. I fear that lobby is a lot stronger, so I am not holding my breath.

TLF+ said...

Thanks, Archer.

An effort to curb "pay day loan" excess just lost in Ohio.

A measure fell short in the South Dakota legislature a few years ago. Rep. Joni Cutler was the sponsor - I've spoken with her about bringing it back and maybe if we can generate some support around the state it would help. Her contact:

Anonymous said...

My wife had a problem with one of the payday operations. Push became shove and the Consumer Branch turned the file over to Winnipeg Police & RCMP who ended up prosecuting on a national scale. There are interest limits in Canada and I'm not sure if that situation of trick billing exists up here.

cp said...

There is an effort on payday loans just about every session. Usually shot down in committee.

This year, it was HB1168. Shot down in committee 11-1, despite many Republican sponsors.

Oh, and: Greedy banks victimize card users with high interest rates and outrageous fees -- I guess Ezekiel was a liberal (Ezekiel 18:19-13, usury is an abomination!). In a modern context I agree that payday lending qualifies as usury.