Saturday, March 12, 2005

Now that we have closed the door to Bankruptcy Court…

30% interest rates: Sound business or loan sharking?


•Hiking rates. Several top issuers now hit consumers with "penalty rates" just below 30% - rates that would violate usury laws in a number of states. At that rate, a consumer paying $300 a month on a $10,000 debt would take more than 44 years to pay it off. Consumers are punished for everything from making one or two late payments to using too much of their available credit limits, even if they have paid on time.
Judy Reid, of Johnson City, N.Y., said her rate on one card nearly tripled to 29.49% recently, despite a good payment record. She said the issuer told her that something in her credit report triggered the increase.
Consumers saddled with onerous rates and fees may well be driven into bankruptcy. Under the bill moving through Congress, most won't find a haven there.
Reining in irresponsible consumers is a worthwhile goal - but only if it's coupled with responsible lending. In biblical times, those who made usurious loans were said to be banished from God's presence. These days, they are rewarded with record profits and new laws tilted in their favor. At a minimum, they deserve a plague of boils.

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