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Linda R. Monk, J.D. Headshot

The Credit Card as Company Store: How Congress Let It Happen

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The curse of working people in the days before strong unions was the company store. In mining towns and manufacturing villages, the employer often owned the only source of foodstuffs and daily necessities, charging exorbitant prices. Thus the employer made huge profits at the expense of his already underpaid workers. They had to work harder at lower wages just to spiral into deeper debt. Sound familiar?

A popular song by Tennessee Ernie Ford during the 1950s expressed this dilemma:

You load sixteen tons, and what do ya get?/
Another day older and deeper in debt./
St. Peter don't ya call me, 'cause I can't go/
I owe my soul to the company store.

Now America's shrinking middle class suffers the same injustice, and today's company store is the credit card. At a time of record unemployment and foreclosures, the banks that issue credit cards are making a bonanza in hidden fees and jacked-up interest rates on those who are late or miss payments.

These banks charge rates of 30 percent and more when the cost of credit to them is virtually nothing, courtesy of the Federal Reserve. Yet the bill to regulate credit cards, passed by Congress and signed by President Obama in May, limits only the rate of increase, not the total interest charged. That's why many credit card companies are raising rates now, before the new law takes effect.

On top of that, the consumer bubble fueled by aggressive marketing of credit cards helped drive the housing crisis. Americans refinanced their houses to pay off consumer debt, and when housing values fell they were under water on their mortgages. This giant sucking sound caused more foreclosures, which caused housing values to fall even lower. The PBS show Frontline recently aired an episode entitled "The Card Game" that documented this devastating attack on the American consumer:

All this is brought to you by the same "too big to fail" banking system that gouges the American taxpayer to pay off Wall Street's gambling bets. The consumer is getting it at both ends by a Congress too timid to take on the banking industry. But the same forces that didn't want Congress to regulate derivatives also don't want Congress to regulate interest rates on credit cards.

There used to be laws in America against usury, the practice of gouging a debtor with outrageous interest rates all for the sin of being poor. There can be again, if we demand it.