A recent mailing from Paypal made me wonder what the status is of state regulations on exorbitant interest rates. In an era of almost zero inflation, the numbers cited in the enclosure above seem to be over-the-top. Do usury laws still exist? Are certain types of lenders exempt?
I could look this up, but I bet some readers will already know the answer. I certainly don't plan to borrow from Paypal, but I'm curious. Thanks in advance.
Reminded me of this John Oliver piece on predatory lending...
ReplyDeletehttps://www.youtube.com/watch?v=PDylgzybWAw
Even if usury laws apply, some companies have found creative ways of dodging them, and now the CFPB has apparently decided not to try to police this behavior. Here's a great Planet Money episode about the situation: https://www.npr.org/templates/transcript/transcript.php?storyId=597759738
ReplyDelete"They knew that online lenders sometimes incorporate on Indian reservations and then claim that they're not subject to state laws. So even in a state that says you can't charge high interest rates, a Native American-owned company can claim, hey, that does not apply to us. We have tribal sovereignty."
DeleteInteresting. Tx, Kyle.
In this case, it's just that Synchrony Bank is based in Utah, which does not limit contracted interest rates.
ReplyDeleteThank you, Kniffler.
DeleteI just received notice that one of my credit cards through CFNA (Credit First National Association - Bridgestone/Firestone) will be going up to 28.8% on August 1st this year. I'm going to pay off that card and close the account as soon as I am able!
ReplyDeleteIn 1978 the Supreme Court ruled that states couldn't enforce their usury laws against banks from other states:
ReplyDeletehttps://en.wikipedia.org/wiki/Marquette_National_Bank_of_Minneapolis_v._First_of_Omaha_Service_Corp.
Interesting. So "usury laws" would mostly be applied to payday lenders and such [maybe a local bank or credit union], and all of the national corporations would be untouchable?
DeleteIn Spain, we have a Law banning usury made in 1908 and Courts usually use it in extreme causes like that.
ReplyDelete