As a Bankruptcy attorney, I speak with clients all the time who are being ruined by excessively high interest rates on their credit cards. Usury is defined as the act of lending money at an unreasonably high rate of interest. In Biblical times, charging interest at all was frowned upon, but today many states have usury laws in place which ostensibly cap interest rates. It is no coincidence then that most major credit card issuers are based in states without usury laws and without interest rate caps on credit cards. Banks and credit card issuers based in these states can charge any interest rate they wish — as long as the rate is listed in the cardholder agreement and the borrower agrees.

How do the credit card companies get away with charging usurious interest rates to “customers” all across the country ? The Supreme Court has been a big help. In Marquette National   Bank v. First of Omaha Corp . the Court allowed First Omaha, a nationally chartered bank based out of Nebraska, to charge its cardholders in Minnesota a rate of interest acceptable under Nebraska law but illegal under Minnesota usury law. In an opinion written by Justice Brennan, the court held that the National Bank Act provision, which authorizes a national banking association “to charge on any loan” interest at the rate allowed by the laws of the State “where the bank is located” preempted Minnesota state law. The result: a nationally chartered bank can charge all of its cardholders according to the law of the state where it is chartered.

The First Omaha Case has been a disaster for the American consumer. Strict application of the National Bank Act has prevented some state legislatures from enforcing usury laws and created a strong business incentive for others not to write them. Credit card default rates are at an all time high, with interest rates spiking to as high as 30%. In my bankruptcy practice, I routinely see clients struggling with credit card debt who have likely paid off the principal amounts borrowed many times over. The usurious interest rates charged by credit card companies are designed as a trap to keep consumers in debt, no lender who charges 25-30% interest expects to be paid back.