Sunday, March 16, 2014

Pretending to be a Lawyer by the Light of a Full Moon

There's a full moon today in a few hours, and if you doubt that a full moon has psychological effects, hold that thought and try to follow this logic.
  1. Credit card lenders commonly charge interest in excess of 30% per year.
  2. Kentucky law, KRS §286.3-740, authorizes banks to charge no more than 21% interest per year (1.75% per month x 12) on revolving credit plans.
  3. Most National Banks are organized in states without interest rate limits (Nevada, Delaware, etc.).
  4. Federal law preempts state law and federal law allows National Banks to operate nationally under the rules of the bank's home state.
  5. Therefore, National Banks doing business in Kentucky are not limited by Kentucky laws limiting the amount of interest that can be charged for credit card debt.
  6. When a credit card debtor defaults, the unpaid balance is accelerated and the debt is sold to a third party, it stops being a revolving credit plan, by definition, and it stops being a debt owned by a National Bank enjoying the supremacy of federal law.
  7. In the hands of a junk debt collector, the debt is just an ordinary unsecured debt.
  8. In Kentucky, ordinary unsecured debts which are not owned by banks or National banks are subject to Kentucky's general usury statute, KRS §360.010, which limits interest to 8% per year.
  9. If the junk debt collector attempts "taking, receiving, reserving, or charging a rate of interest greater than is allowed by KRS 360.010," (8%) for any period after assignment of the debt from the National Bank, the debt collector runs afoul KRS §360.020 and the civil forfeiture provisions therein.
I've gone down this road before, See: Washington Mutual (WaMu) credit cards


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