The Plastic Loan Shark In Your Wallet

[ Posted Wednesday, July 12th, 2006 – 16:23 UTC ]

How many voters in Red State America would strongly consider electing a Democrat if it meant the cost of their credit cards would go down? How many swing voters would be swung by such an appeal? Most importantly, how many economically-struggling non-voters would take the time to register and vote if they were promised an end to 28% or 29% interest rates on their credit cards? The answers seem obvious, but that doesn't mean the Democratic Party is paying attention.

Last year, Representative Bernie Sanders [Ind-VT], who is currently running for Jim Jefford's Senate seat from Vermont, proposed a "Loan Shark Prevention Act" in the House. He explains it with passion on his website, and in an op-ed piece he wrote, both of which are well worth a read. He doesn't mince words, and shows remarkable backbone in addressing an issue he obviously cares about.

Democrats should take note. Almost everyone has a credit card these days, making it an issue of near-universal concern. Of course, it wasn't always this way. When I grew up, credit cards were hard to get, since it wasn't that easy to qualify. This was before the credit industry figured out that giving cards to high-risk people (who often default on their debt) was still profitable as long as the interest rates to that group as a whole were high enough. So now everybody can have a card, but some are paying 20%, 25%, or even greater interest rates. This used to be called "usury," or -- more bluntly -- loansharking.

Rep. Sanders' bill would put an end to the worst excesses of the credit card industry. It would cap interest rates at 8% above what the IRS charges in interest (a total of 14% when the bill was introduced). It would cap penalties and fees (such as late fees) at $15. It would also restrict when credit card companies could change customers' interest rates, which is today completely unrestricted. Since it makes so much sense, it will come as no surprise to hear that the bill disappeared into a Republican-controlled subcommittee last year and hasn't been heard from since.

But it seems to be yet another issue that would do wonders for the Democratic Party if they would just get behind it. If you offered voters the choice between a Republican ideologue or someone promising a maximum 15% interest rate on their credit card, who would they vote for? How many suburbanites would respond to such a choice by voting for a Democrat? Enough to win back Congress is my humble prediction.

Many of the policy initiatives I proposed in my book How Democrats Can Take Back Congress seem to bear a high cost, since they are what I call "Neo-Populism": by definition, the issues appeal widely to the general public, but they are also strongly opposed by affected corporations and industries (who have enormous vested interests in preserving the status quo). This terrifies Democrats in office (or seeking office) because they are afraid campaign contributions will disappear from these wealthy corporate donors.

They should take heart in Jim VandeHei's recent article in the Washington Post titled "Democrats Closing Fundraising Gap With Republicans: Increase in Grass-Roots Support Buoys Party as GOP Efforts Falter." While the article does admit that things could go either way before this year's election, it points out the trend is towards more grassroots money coming in to Democrats and less going to Republicans.

This, as Martha Stewart would say, is a good thing; but the article also points out a rule of thumb many in politics miss: when large corporate interests see one party as the probable winner in an election, they'll donate to that party in an attempt to "protect their interests" -- no matter what the party is saying about them. So even if corporate money initially waned as a result of Democrats taking on populist causes, eventually the money would likely return if the issues were seen to be big winners politically.

Admittedly, this is a best-case scenario, but my guess is that championing issues that are wildly popular with the average Joe and Jane isn't going to lose the party money in the long run, or (worst case) not nearly as much money as some predict.

When I was preparing my book's manuscript, I timidly cut the credit card rate cap idea from the short list of suggested policy initiatives, even though it was a favorite of early reviewers. I figured the consumer credit industry was just too formidable an opponent for the issue to be politically viable. Now I'm not so sure.

The downside of supporting it would be losing an enormous amount of campaign money from the entire banking industry. But as the Post article points out, maybe that wouldn't be as dire as it sounds. Maybe that campaign cash could be replaced by people who get excited about the issue.

And in the end, it's votes that get you elected, not campaign contributions. Most voters don't own banks or consumer credit corporations. But almost all of them have credit cards in their wallets.


[See the original Huffington Post article, complete with comments.]

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