Hello, this is Lev Selecter, founder of 101creditrepair.com, and our today’s topic is about higher rates and fees which credit companies are charging us. Many people are asking if this is even legal to charge such a high interest and such high fees, and the answer unfortunately is yes, it is legal. Let me tell you, explain how all this developed. Before late 1970’s, credit cards were not common and lending was regulated by local state laws, they were so called usurer laws or anti usurer laws. Usurer means interests, so these were laws which were preventing banks from charging excessive interests. And these laws still exist, and on our website if you go to 101creditrepair.com to the resources section, we have links to laws in different states, so you can see what their rates are out in different states. And then there are also laws called UCC laws, Uniform Commercial Code, which also regulate things like that. But what happened in 1978, there was a decision of a US supreme court, there was a case where the bank was, a national bank, residing in one state where high rates were allowed by local laws, were providing services, which means lending money to a company in a different state with allowed interest was lower. So this local company claimed that it was illegal for the bank to charge high interest because in the, this particular state, this high interest was not allowed. So the decision of the court was unanimous and it was that the nationally chartered bank, big banks can charge interest base on their state of origin. And this was a very important decision, some people believe that this decision was the major drive causing the flourishing of credit card industry, which some people again believe had a very detrimental effect on American economy, very negative effect. But this is different topic, important that this happened in 1978, and what banks starting to do, they started to move their operations to the states which are favorable for them as far as interest, like Delaware, South Dakota, and then started to provide services to all other states and credit card industries started to grow. In 1980, another event happened; a new law was passed by congress which is called Depository Institutions Deregulation and Monetary Control Act. And you know, this is very important piece of legislation. For example, you know that if you put money in the bank, the first hundred thousand dollars is insured by the feds, this is part of the law. This law allowed the banks to do many things, like banks are allowed now to merge, to do different things. One of the things important for this topic is that, banks were allowed to charge high interest overriding the local state usurer laws. So it basically removed the limitations, remove the cap on how much banks could charge, and that’s it. After that, credit card industry, the lending industry, installment payment, lending started to grow very fast and this is what we have today. So, the banks, the big banks definitely can charge high interests and fees. Now, what about local banks, well local banks became at a big disadvantage against the big banks because they were still limited by anti usurer laws in their local state, so what states started to do to help their own local banks, they started to loosen up their regulations, increasing the allowed interest in the states. So, overall, over the years, the allowed rates grew. So here, where we are now, so the answer is unfortunately yes, banks can charge high interests and fees. Now, in the next video, we’ll talk about collection agencies, can collectors charge high interests and it’s a different story and they’re regulated differently. For more information, I highly recommend to visit our website which is 101creditrepair.com. The resources section, our guide, more videos like that, they will really help you to increase your credit score. Thank you for listening.
Transcription by:
Scribe4you Transcription Services