By Ryan C. Wood
Howdy my fellow humans in the age of artificial (aka fake) Intelligence rising, Trilithon stones, DOGE, Kardashians’ still make news, and capping interest rates at 10% for credit cards? Oh, me oh my. I do not know how Bernie Sanders and company came up with 10%? Why only target credit cards? Call me. Since 1978 it is clear Federal banking laws trump state bank laws. It appears the S.381 was thrown up to never pass? Capping credit card interest rates at 10% would cripple our economy overnight and there are bigger fish to fry here. Short-term loan interest rates like pay-day loans and other short-term loans have 100% interest or higher. We have Merchant Cash Advance agreements under New York State law that are horrible and unconscionable. A merchant guarantees payment of the debt with future receivables and the lender files and UCC 1 financing statement to secure the future receivables? This will be an entirely different article explaining how that all works.
I agree that we need Federal Legislation that is enforceable across the United States regarding interest rates.
What should be the focus of Federal Legislation is capping short-term loans with unconscionable interest rates even the mob did not charge. On April 8, 2016, I wrote about “How Can 1000% Interest Be Legal?” https://www.westcoastbk.com/blog/2016/04/how-can-1000-percent-interest-be-legal/
Going on 9 years and nothing has changed. Procedural and Substantive Unconscionability are alive and well in lending to poor people in financial distress. As I have explained before. We have laws limiting prices in time of calamities such as floods or tornadoes to not price gouge. Why do we not have similar laws for when your fellow human, for whatever reason by the way, deems it necessary in their financial calamity to seek a pay-day loan.
“The oppression that creates procedural unconscionability arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.” Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 4th 1332, 1347–48, as modified on denial of reh’g (Feb. 9, 2015).
“The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” Armendariz, 24 Cal. 4th at 113 (quoting Neal v. State Farm Ins. Cos., 188 Cal. App. 2d 690, 694 (1961)).
How about making loans like these not legal. How about Courts enforce Procedural and Substantive Unconscionability law and pay attorneys their fees for bringing these lawsuits to right wrongs. I challenge any bankruptcy attorney to object to a proof of claim in a bankruptcy case arguing the underlying agreement was Procedural and Substantive Unconscionable, win, and get the Bankruptcy Judge to award attorney fees for winning. I have no doubt it has happened. With all of the unconscionable types of loans we see there should be more. As it stands, few humans that have been taken advantage of or are incurring multiple horrible loans do not have the funds to pay any bankruptcy attorney to enforce their rights.
The following are all real loans, in writing, and are somehow perfectly legal.
Advance.cash 299.80% interest rate on a $3,500.00?
BlueTrust Loans 579.48% interest rate on a $6,700.00 loan?
InBox Loans 776.57% interest rate on a $7,800.00 loan?
These types of short-term loans are exempt from usury laws and are part of established loopholes. I have seen over 1,000 % interest as well. https://www.westcoastbk.com/blog/2016/04/how-can-1000-percent-interest-be-legal/
Capitalism versus morals versus integrity versus ethics? Capitalism is winning. Can I as an attorney fool someone into paying 10 times as much as they should for the services they need? That is unethical.
What happened to state usury laws? Well, in 1978 your Supreme Court of the United States held that Federal Bank laws TRUMP state banking laws and usury limitations. See Marquette National Bank v. First of Omaha Corporation, 439 U.S. 299 (1978) In short, a bank may charge interest according to the state law they are doing business in and not be limited by the state usury laws in which their customer lives.
Back to the 1978 Marquette National case. Oh yeah. Something about a Civil War and the North, the Federal Government won. So yes, Federal Law does TRUMP state laws. But how does the state law of one state TRUMP the state law of another state? That is what Marquette stands for. Right now New York law allows Merchant Cash Advances or “MCA Agreements”. Mark my word. MCA agreements will have a short shelf-life because the types of agreements are not legal and unconscionable in every way. New York can export loans or extension of credit allowable under New York state law to humans in different states even though state law in their state says this type of agreement is not legal. It is unconscionable and violates various state usury laws.
Why is there no legislation making these short-term loans ILLEGAL? How are these types of loans different from when the MOB was loan sharking?
S.381 — 119th Congress (2025-2026) As of 02/27/2025 text has not been received for S.381 – A bill to amend the Truth in Lending Act to cap credit card interest rates at 10 percent.
Many states have usury laws limiting interest rates to a subset of society; not all of society. Federal banking law TRUMPS state law and it is truly how we go to 30% interest on credit cards. Yeah, my fellow humans, the North and Federal Government won the Civil War.
Do We Need A National Usury Laws?
Yes, yes we do. In the Marquette case cited above, the Supreme Court of the United States held a corporation may export the usury laws of the state the corporation is doing business into citizens of other states. This is even though the human lived in a state limiting interest rates under their State law. This law change opened the door to 30% interest rates revolving credit card statements.
New York law and Merchant Cash Advances and are how the MCA agreements illegal or should be illegal? This touches on the heart of why we need National Usury Laws to bring consistency to our legal landscape.
So, you want to cap interest rates to do what? Limit the interest on revolving credit card accounts. Yeah, I have advocated for a limit to interest rates like we had prior to 1978. But 10%. The cat is out of the bag people. The train left the station. We are never going to be to cap interest rates at a mere 10%. Somewhere between 17% – 20% I believe is financially possible and not entirely disrupt commerce.
Our economy and government are entirely based upon debt and the interest generated by the debt. Limiting credit card interest rates to just 10% would instantly require the cancellation of a large percentage credit cards and access to credit generally. Cash advances are widely used on credit cards to help in times of need. Default interest rates must be higher than standard interest rate. Capping credit card interest rates at 10% is just not feasible given the credit market we are stuck with.
But first, we need to cap short-term loans like pay-day loans. Making a standardized form all pay-day loan companies must used with clear payment guidelines and penalties for late payments would go a long way to help stop fraud. There is a reason pay-day loan companies never report to the credit bureaus the debt and payment history.