Wrestling with banks over credit card interest rates

Massachusetts Treasurer Tim Cahill’s plan for pressuring large banks to respect the state’s law capping credit card interest rates at 18 percent is turning into a largely symbolic protest.

As I reported here last month, Cahill, who is also an independent candidate for governor in the upcoming November elections, decided to withdraw state funds from three banks — Bank of America, Citigroup, and Wells Fargo — that do not honor the Massachusetts usury statutes. These banks can get around the law because they are chartered or based in other states.

But the Boston Globe is reporting today that Cahill still has million of dollars in state and municipal funds in banks such as JP Morgan Chase and American Express that are also ignoring the law.

So far, Cahill’s threat has not spurred any bank to cap rates. But the treasurer said it could make a difference if enough government agencies and institutions follow suit.

“It’s like throwing a stone in the water,’’ Cahill said. “We don’t know how many waves it will create. It may not create any.’’

Meanwhile, interest rates as high as 30 percent may force the hand of many Massachusetts consumers, and force them to consider a bankruptcy case as the most practical way of dealing with this crushing debt. With the interest charges and fees eating into what little disposable income remains at the end of the month in a typical household, more and more of these Massachusetts debtors are calling to inquire about filing a Chapter 7 case; ultimately the banks choice to ignore the state law could prove counter-productive to their bottom line.

 

By Doug Beaton

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