The Plastic Loan Shark In Your Wallet

07/12/2006 04:23 pm ET Updated May 25, 2011

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.