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A Question of Usury
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Posted by attorney2k (199.174.160.30) on January 16, 2004 at 21:38:22:
Although I am an attorney, I have not been able to find the answer to this question and was wondering if someone here might have given this some thought. Most of you are probably aware that credit card companies are able to charge outrageous interest rates. In fact, these interest rates are the core of most anger toward the credit card companies. These rates, according to the usury laws of most states, are usurious and illegal. However, the United States Supreme Court has held that if a federally chartered bank is based in a state which permits the high interest rates, then the law of that state will prevail. Thus these banks have based themselves in the states which allow high interest rates or have no prohibition on interest rates at all. The companies that you actually have contracts with for credit cards are almost always federally chartered banks located in these high-interest states and according to the U.S. Supreme Court, they are able to charge the usurious interest rates. This is is all clear. Now my question. After the credit cards go into default, the accounts are often sold to third party collection agencies which are not federally chartered banks. These third party collection agencies then continue to charge the usurious interest rates. I cannot seem to find any cases on point, but it seems to me that these collection agencies (since they are not federally chartered banks) may be subject to the usury laws of the many states which prohibit high interest rates. If my theory is correct, many of these debts could be successfully defended. Usury law in some states are extremely strict, some even allowing for complete elimination of the debt. It seems that anyone facing collection by third-party collection agencies which continue to charge outrageous interest rates should definitely give this matter some thought? Does anyone have any knowledge of this area?
attorney2k
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