(Photo: MnIndy)

Photo: MnIndy

A national movement called 10 Percent is Enough is taking to the streets in protest of “usury,” the practice of overcharging borrowers that’s prohibited in the Bible, the Qu’ran and the Torah. Protests in five U.S. cities late last month called on banks to reduce credit interest to ten percent — a figure the group says “puts proportion and equity into the relationship between the lender and the borrower.” While the movement of faith-based and anti-poverty groups hasn’t yet had a Minnesota presence, the dismantling of national usury laws — not mention hope for restoring one — has Minnesota roots.

Usury laws have been around for centuries, opposed by Plato and Plutarch and prohibited in some form in holy books including the Old Testament and the Qu’ran, not to mention by American law — up until three decades ago. In 1978, the Supreme Court of the United States ruled unanimously on the case, Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., which essentially resulted in the exemption of national banks from state-based usury laws, allowing lenders to sidestep credit caps when dealing with out-of-state customers. That means banks that operate nationally are governed by the Banking Act of 1864, which predated the credit-card industry and has no interest rate cap.

As Chicago labor lawyer Thomas Geoghegan explained it,

[T]his sealed what had been a trend throughout the country, which is lifting these interest rate caps for banks and giving consumers easy credit on the premise that they would just pay tons and tons of interest so that the banks were protected if the loan weren’t repaid. In fact, the banks had incentive to hand out credit cards and hope that the loans would not be repaid, because the interest rates on these credit cards were so high.

You know, if you are Mr. Potter in It’s a Wonderful Life and can only get six percent, seven percent on your loan, you want the loan to be repaid. Moral character is important. You want to scrutinize everybody very carefully. But if you’re able to charge 30 percent or, in a payday lender case, 200 or 300 percent, you don’t care so much if the loan—in fact, you actually want the loan not to be repaid. You want people to go into debt. You want to accumulate this interest. And this addicted the financial sector to very, very, very high rates of return compared to what investors were used to getting in the real economy, the manufacturing sector, General Motors, which would give piddling five, six, seven percent returns.

A bill was introduced in the U.S. House of Representatives this spring that aims to “amend the Truth in Lending Act to establish a national usury rate for consumer credit transactions, and for other purposes,” and two weeks ago, U.S. Rep. Keith Ellison became one of its 16 cosponsors. H.R. 1608, the Protecting Consumers from Unreasonable Credit Rates Act of 2009, would create a national interest-rate limit on credit cards, payday loans and tax-refund-anticipation loans (its Senate companion is S. 500).  The bill has been referred to the House Committee on Financial Services and appears to be going nowhere. While it moves to offer consumers protection, it sets that rate cap far beyond what 10 Percent is Enough seeks — at 36 percent.

Watch 10 Percent is Enough’s video: