Credit Card Interest Rates Go to Court
Credit card interest rates usually enjoy wide
protection from usury laws.
Under a United States Supreme Court decision
(Marquette v. First Omaha Service Corp. 439 U.S.
2990 (1978), courts have recognized the rule that
banks organized in states that allow very high
limits (or no limit) on interest rates can charge
the same rates in any other state as well. This is
the reason many banks that issue national credit
cards are based in Delaware or South Dakota.
Rosemary DeCristoforo, though, a Beverly Mass.
resident, was fortunate enough to find a lawyer who
thinks “outside the box.”
Ms. DeCristoforo was a customer of Citibank and
became late with her payments. For this reason,
Citibank increased her interest rate to slightly
When Citibank sued her to recover the money she
allegedly owed them, she counter attacked, claiming
that the interest rate she was charged was not
usurious (as a matter of law) but unconscionable.
Judge Robert Cornetta of Essex Superior Court in
Salem issued an opinion quite sympathetic to her,
stating that interest rate charges above eighteen
percent are unconscionable and so outrageous as to
warrant holding them unenforceable.
Judge Cornetta’s decision included some unflattering
observations of the consumer credit industry.
In 2003 there were 144 million credit card holders
in the U.S. While the number of cardholders has
since 1990 risen by 350%, income has risen only by
188%, the judge observed, also noting that consumers
are using credit cards for everyday necessities such
as food and utilities. In November 2007 total credit
card debt has reached an all time high of $790.2
billion. Judge Cornetta observed that the “general
public was drowning in credit card debt” and that
“unregulated interest rates and hidden fees … make
it impossible for consumers to get out from under
these debts, adversely impacting upon the ability of
consumers to ever emerge from an endless interest
and fees induced spiral.”
Regrettably, Judge Cornetta’s opinion is not binding
on other judges. However, it can be brought to the
attention of other judges and used in argument.
Citibank is not alone in charging very high interest
rates. First Premier Bank, based in Sioux Falls,
South Dakota issued a credit card carrying an
interest rate designated for folks with damaged
credit, at 79.9 percent, again, demonstrating that
the industry has little empathy for the poor,
unemployed or disabled who often are forced into
these rates if they want a credit card.
David Grossack is a
lawyer, writer and activist residing in Hull,
Massachusetts. He practices law in Newton. Visit his
website at www.grossack.com. He is currently working
on a self help book for persons sued by credit card