High interest rate abuse is capped
Doug Corey, of Rhode Island, testified about how unfair credit rates had impacted his life.
Senators Whitehouse (D-RI) and Durbin (D-Ill) held hearings in the Judiciary Committee for highly indebted credit card holders in relation to the proposed S 257 bill, which would erase debts with high interest rates for individuals filing bankruptcy.
“The standard credit card agreement gives the lender the power to bleed their customer through evolving and ever more crafty tricks and traps,” Whitehouse said at the hearing. “Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to the edge of bankruptcy.”
In essence, debts would be dismissed in bankruptcy, if interest rates are above the lesser of:
- 30 year treasury bond yield plus 15%, which amounts to an 18.5% today,
- or 36%.
This bill would benefit chapter 13 filers, whose higher income disqualifies them for a chapter 7 filing. And, is justified because it protects the debtor from abusive lending practices.
It would further benefit all those carrying a high interest debt at risk of filing a chapter 13, in their negotiations for an adjustment to the terms of a credit card or personal loan.
Things are looking up.