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(CNSNews.com) – Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) unveiled legislation Thursday aimed at fighting predatory lending practices of banks and to protect consumers from “exorbitant” credit card interest rates.
They also propose giving the U.S. postal service the ability to conduct basic banking services, allowing people to cash paychecks, transfer money electronically, and pay bills.
“An additional crisis, but part of this whole situation is that many poor people don’t have access to banking services, because the big banks are not worried about somebody who makes $10 an hour. They can’t make enough money for that, so we have got to move toward universal banking through the postal system,” Sanders said in a livestreamed video on Facebook and Twitter.
“You have post offices in almost every community in America. They should be available to provide basic banking services so that people do not have to go into payday lenders,” Sanders said, adding, “If you think Wall Street is disgusting, think about payday lenders charging people 100 -150 percent interest rates.”
“Post offices exist in almost every community in our country. There are more than 31,000 retail post offices in this country. An important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services,” Sanders and Ocasio-Cortez explained in a press release on Sanders’ website.
“The Postal Service already cashes Treasury checks and issues money orders. The USPS should fully exercise its existing statutory authority and implement pilot programs offering affordable financial services, including ATMs, paycheck cashing, bill payment and electronic money transfers in post offices,” they added.
Ocasio-Cortez said it’s “expensive to be poor.”
“If you’re poor, your interest rates are much higher. You live in a food desert, so your average head of lettuce or your average bit of spinach is much more expensive than it is in other communities,” she said.
The congresswoman shared what banking was like for her while she was waitressing in New York City.
I remember when I was waitressing, and I had a checking account. Now with a lot of these corporate checking accounts, before I had pulled my money out and joined a non-profit bank, what happens is that you need to keep a minimum of say $1500 in your bank account for all 30 days of the month so that you don’t get charged $25 for them to have the privilege of holding your month.
And so you’re paying $25 a month just to keep your money in a bank account, and the average American has—so many Americans have less than $1,000 in savings, so we’re talking about the majority of people that have incurred a $25 a month charge to just keep your money in a checking account. We’re talking about even if you try to avoid that charge and you take your check to a check cashing place, which is very common here in my community. You take it to a check cashing place. They’re charging you 10 percent just--- sometimes 6, 10 percent to cash a check. It is expensive to be poor.
According to the Postal Service website, the Postal Service finished 2018 with $13.2 billion in outstanding debt.
“The organization plans to reduce its debt level by an additional $2.2 billion as existing debt matures in February and May 2019,” the Postal Service stated in a press release.
“The Postal Service reported a net loss for the year of $3.9 billion, an increase in net loss of $1.2 billion compared to 2017. The controllable loss for the year was $2.0 billion, an increase of $1.1 billion. Similar to the last several years, the Postal Service was unable to make the $6.9 billion in payments that were due to the federal government at the end of fiscal year 2018 to pre-fund pension and health benefits for postal retirees, without putting its ability to fulfill its primary mission at undue risk,” it stated.
Sanders and Ocasio-Cortex introduced the Loan Shark Prevention Act, which would cap credit card interest rates at 15 percent.
“The reality is that today’s modern-day loan sharks are no longer lurking on street corners breaking kneecaps to collect their payments,” Sanders said in a press release on his website. “They wear three-piece suits and work on Wall Street, where they make hundreds of millions in total compensation and head financial institutions like JPMorgan Chase, Citigroup, Bank of America and American Express.
“Right now you’re looking at a median credit card interest rate now of over 21 percent. That means half of the American people are actually paying more than that. So if you’re earning $10 a hour, now you don’t have enough money to take care of your family, you’re going to be paying 22, 25 percent interest rates, and then on top of that, what is not widely discussed, you go to Macy’s, you go to Kohl’s. You go to any large department store, and they say, get our credit card. You get their credit card,” Sanders said.
“What you don’t know is you’re going to be paying something like 27 percent interest rates on that credit card. How much do the banks borrow money at? They borrow money from the feds at 2 and a half percent, and then they charge people 18, 20, 25 percent interest. Here’s what is even uglier. The poorer you are, the more desperate you are, the higher the interest rates are,” the senator added.
“What Alexandria and I are proposing in our legislation is something that is not complicated. It just takes us back to where we were a number of years ago, and that is that no bank in this country should have credit card interest rates of over 15 percent. So bringing back the concept of usury laws where banks cannot try to get blood out of a stone,” he said.