#Usury #Laws - #History

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Lots of great information in this article of you care to take a look at it.. Center for economic and policy research: A Short History of Financial Deregulation in the United States Matthew Sherman
July 2009

For my purposes I have decided to focus on the elimination of usury laws in 1978. This has given a license to to steal to any and all who choose to loan fiat money ever since it occurred.
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Usury Laws

In the 1970s, most states still had in place the usury laws from the early years of the century. The interest rate ceiling imposed by these laws imposed little constrain on lending in the first decades after World War II. When inflation picked up in the 70s, the ceilings set by usury laws became an important constraint. This was especially true with credit cards, the use of which began to grow rapidly in the late 60s and 70s.

In 1978, the national landscape of usury regulation changed fundamentally with the Supreme Court’s decision in Marquette National Bank v. First of Omaha Service Corp. For the first time, the Court considered the question of which state usury law applied to nationally-chartered banks lending across state lines: the bank’s home state or the borrower’s home state? The Court ruled that the bank’s home state law applied, allowing national banks to effectively export the maximum interest rate regulations from one state to their operations nationwide. This provided every incentive for financial firms to relocate their businesses to the states with the most industry-friendly regulation.

In one instance, the state of South Dakota considered completely eliminating usury ceiling legislation in the state in order to attract the credit card operations of Citibank. The arrangement promised to create new jobs in the languishing economy of South Dakota while removing interest rate restrictions for the national commercial bank. Citibank executives made phone calls to the Governor and personal visits to the state, stressing the urgency of the situation. They explained that the bank was struggling to stay afloat and would relocate to South Dakota immediately if the usury laws were overturned. As former Governor Bill Janklow recounts, the process moved so quickly that the legislation was introduced and passed in one day. Overnight, South Dakota had become a regulatory haven for the credit card industry.

South Dakota’s actions prompted several other states, most notably Delaware, to eliminate their
usury ceilings in response. The competitive wave of deregulation was hugely beneficial to the credit card industry. Nationally chartered banks could now relocate their operations to one of the few states with deregulated usury ceilings and export those regulations nationwide. The end result was a paradoxical one. Nearly every state, with two exceptions, still had strict usury laws on their books, but banks were able to charge any interest they wanted nationwide. The Supreme Court’s Marquette decision had ushered in the de facto disappearance of usury ceilings, at least for many types of loans.

Mercatante, Steven, “The Deregulation of Usury Ceilings, Rise of Easy Credit, and Increasing Consumer Debt,” South Dakota Law Review, Spring 2008. http://findarticles.com/p/articles/mi_m6528/is_1_53/ai_n25019601/

Interview with Bill Janklow, Frontline: The Secret History of the Credit Card, November 23, 2004. http://www.pbs.org/wgbh/pages/frontline/shows/credit/interviews/janklow.html

Peterson, Christopher L., “Usury Law, Payday Loans, and Statutory Sleight of Hand: An Empiirical Analysis of American Credit Pricing Limits,” University of Florida, August 8, 2007.
http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=christopher_peterson