All their lives, Billy and Aida Ojopi have worked hard to provide for their family. He is a pastor. Three of their children are in college. By most standards, they are an American success story.
But when I met them at the Urban League of Rhode Island earlier this week, they were struggling. Without warning, the interest payments on their home mortgage had gone through the roof. They began using their credit cards to make ends meet, but then those rates jumped, too.
It’s an all too familiar story. As mortgage payments, the price of gas, and grocery bills climb higher, families begin sinking into the quicksand of credit card debt. Interest rates that can increase for any reason — or sometimes for no reason at all — are leaving too many families facing difficult times, even as credit card companies’ profits last year reached a staggering $41 billion.
Interest rates that can climb well above 25 or 30 percent are excessive, unnecessary, and harmful both to family budgets and our economy. It’s time to level the playing field.
This week, I introduced the Consumer Credit Fairness Act (S. 3259) because Rhode Island working families need some relief from unreasonable interest rates. Under my bill, if a customer files for bankruptcy, creditors charging excessive interest rates and fees would not receive a single dollar in repayment until all other creditors are paid in full. In practice, these creditors would likely miss out on getting paid at all.
If it becomes law, this common-sense reform would give consumers powerful leverage to negotiate with their lenders. A borrower paying outrageous interest could say to her credit card company: “Lower my rates, or I will have to file for bankruptcy and you will get nothing.” This leverage will not only help people on the financial brink, but will encourage lenders to set reasonable rates for everyone.
I have also cosponsored new legislation to ban some of the most egregious practices that the credit card industry has developed in recent years. The Consumer Credit Protection Act (S. 3252), introduced by Senators Chris Dodd (D-CT) and Carl Levin (D-MI) would prohibit “any time, any reason” rate hikes and require credit card companies to give consumers 45 days’ notice for changes to the terms of their agreements, among other changes.
Abusive lenders should no longer be able to take advantage of consumers without facing significant consequences. Rhode Island families deserve no less.
Sheldon Whitehouse represents Rhode Island in the United States Senate.
