Consumer Credit Crisis
Looms
By Bradley Blakeman
Newsmax.com
The average American family owes $8,000 in credit
card
debt, according to the American Bankers
Association. According to the U.S. Census Bureau,
the real median gross household income is
approximately $50,233.
It should be noted that today there is not always
one single breadwinner, so that figure takes into
account, in most cases, two incomes within the same
household.
With unemployment nationally above 8.3 percent,
financial instability, consumer confidence tanking,
inflation worries, and a national housing and
foreclosure crisis, just to name a few of our
troubles, it is only a matter of time before the
next financial shoe drops — consumer credit card
debt.
A contributing factor to the financial woes that
have caused the recession has been and continues to
be the uncontrolled "usurious" interest rates
charged on consumer credit cards by our major
national banks, resulting in the inability of
consumers to pay the debt down or off.
Banks and other financial institutions have
unconscionably and persistently preyed on and
bombarded consumers with easy, "cheap" credit. They
sucker customers in with an interest rate as low as
2 percent for the first six months or year.
Thereafter, the institutions totally conceal the
fact that they have the right in most instances to
raise that rate with an uncontrolled variable
interest rate, which I have seen as high as 32
percent per annum.
How is it possible that companies can charge
consumers such unconscionable interest?
Follow the paper trail. Many banks offering consumer
credit have situated their consumer credit
operations in states like South Dakota. The reason
is that these states allow banks to charge interest
rates that would clearly be usurious in many other
states.
For example, New York State limits interest rates on
credit liability to 16 percent per annum; if the
rate charged exceeds 25 percent per annum, it is a
felony criminal offense. Most states have similar
caps and penalties.
In addition, many of the banks inducing Americans to
"purchase" homes the banks knew they could not
afford induced these same people to take on
additional debt through credit cards. The dilemma
for an American family is not even the choice of
which to pay — the mortgage or the credit card.
It is clear they cannot pay either.
The resulting spiral of consumer debt default, both
mortgage and credit card is a major factor that
caused the recession — the effects of which we are
still feeling today.
Add the financial collapse of the very institutions
that created this huge Ponzi scheme — and let us not
forget rising unemployment — and we are in for a
long recovery.
The Obama "Recovery Act," has not even addressed the
root causes of the recession, i.e., greed and
predatory consumer lending practices.
We need to eliminate the root causes of “easy
credit” and predatory lending. We need to learn from
our mistakes. We need tough laws to cap consumer
interest rates and stop, once and for all, predatory
lending.
We also need to make it harder to extend consumer
credit to those who can least afford it. People
should be able to borrow commensurate to their
verified and attested to income, assets, and their
ability to repay pursuant to fair, reasonable and
understandable terms and conditions.
We do not need more government — agencies or czars.
What we do need is uniform lending and interest
legislation and Congressional oversight.
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