Socialists Come for Your Credit Cards
Sanders and AOC team up to limit interest rates ... and choices for consumers.
Americans collectively carry more than $1 trillion in credit card debt and $4 trillion in total consumer debt. Most folks don’t pay off their cards each month, and credit card companies charge very high interest rates on that debt, which disproportionately hurts poor and younger Americans. Last year alone, credit card companies raked in $113 billion in interest and fees, a 35% increase from 2012. It’s a massive issue affecting millions of people who would benefit from good financial counseling and planning. But, as usual, the leftist solution is worse than the problem, even if it does — like Democrat offers on college tuition and student loans — have populist appeal across party lines.
Socialists Bernie Sanders and Alexandria Ocasio-Cortez have teamed up to introduce the Loan Shark Prevention Act. The legislation would limit credit card interest rates to 15% — significantly lower than the “extortion-level interest rates” Ocasio-Cortez says companies now charge. According to The Washington Post, “For borrowers with high credit scores, the average rate was 17.73 percent last week. … For those with poor credit scores, the average is now about 24.99 percent.” The median interest rate is currently 21.36%.
Those rates have climbed precipitously in recent years. In part, that’s for good reason. People with lower credit scores have a poor track record repaying debt. And the financial crisis of 2008 was driven by banks taking undue risks (mandated by Democrat law) on borrowers with bad credit. Hedging against that is a basic business decision, and the result of the legislation to “fix” the problem is that fewer poor people will be able to get credit cards. It’s reminiscent of Barack Obama’s regulations on payday lenders. Those lenders are distasteful but sometimes necessary options, and enlightened bureaucrats in Washington aren’t going to improve anything.
Speaking of payday lenders, the Sanders-AOC legislation aims to create an alternative “not-for-profit public option for basic banking services” via … the U.S. Postal Service. Yes, the same U.S. Postal Service that has lost $69 billion since 2007. As Hot Air’s Ed Morrissey quips, “The idea that the US Postal Service is a good model for any kind of ‘public option, let alone banking, is an absolute riot.” But Sanders and AOC are totally serious.
By introducing regulation and eliminating options, argues Reason’s Peter Suderman, “What Sanders is actually bragging about is eliminating choices — choices that may seem unfortunate or unpleasant to the sort of people who, say, own three homes and write bestsellers that make them millionaires — but which often benefit the people who make those choices: lower-income people with less stable finances. In essence, Sanders is proud of having eliminated useful financial tools for the poor.” Nonetheless, it will win him and the Democrat Party votes, so they’ll keep doing it.