Sen. Sanders On Credit Card Companies

The Bible has a term for this practice. It's called usury. And in The Divine Comedy, Dante Alighieri's epic poem, there was a special place reserved in the Seventh Circle of Hell for sinners who charged people usurious interest rates.

Today, we don't need the hellfire and pitch forks, we don't need the rivers of boiling blood, but we do need a national usury law.

We need a national law because state laws no longer work. States used to protect consumers from predatory lenders, but strong state usury laws were obliterated by a 1978 U.S. Supreme Court decision. Justices allowed national banks to charge whatever interest rate they wanted if they moved to a state without an interest rate cap. So major credit card issuers moved to places like South Dakota and Delaware that don't have usury laws.

That is why I have introduced legislation to require any lender in this country to cap all interest rates on consumer loans at 15 percent, including credit cards. Why did I select 15 percent as the appropriate rate to deal with the usury which is going on in this country? The reason is that 15 percent is the maximum that Congress imposed on credit union loans almost 30 years ago when it amended the Federal Credit Union Act. That approach has worked! Under current law, credit unions are allowed to charge higher interest rates only if their regulator, the National Credit Union Administration (NCUA), determines that it is necessary to maintain the safety and soundness of these institutions. Right now, while most credit unions charge lower rates, the NCUA allows credit unions to charge an interest rate as high as 18 percent.

Unlike their counterparts at the big banks, credit unions are not lining up for hundreds of billions in bailouts. In fact, they're doing quite well. They are responding to the credit needs of the small businesses in their communities and to individuals. They have not only survived this regulation, they are functioning exactly the way they are supposed to function. In my view, the rules that have worked well for credit unions for decades can work for all financial institutions.