I am a self-employed attorney in Durham, NC.

I am a self-employed attorney in Durham, NC.  I am writing to make an economic recovery suggestion based on a recent unfortunate experience I had with Bank of America.   I have two credit cards with Bank of America. One of the cards has an APR of 8.99%.  Until recently, the other card had an APR of around 9.5%.  However, on my February statement I noticed that the interest rate on the second card had increased to 26.99%.  There was a note on the statement saying that because I had paid past the due date or exceeded the credit limit, they had tripled the APR. I immediately called their customer service line to see if they would forgive my errors and return my account to the previous rate.

I advised the representative that my exceeding the credit limit (by $62.14) and making a late payment (one week late) was due solely to inadvertence, and that as soon as I realized the errors, I had corrected them. (I also had, apparently, paid a few days late another time within the previous six months.  However, I do not believe I have ever gone a month without making a payment).   Unfortunately, neither she nor her supervisor could help me.  I tried to reason with her. I pointed out that “we are all in this together,” that my financial health was important to Bank of America and to the nation just as Bank of America’s health was important to the nation. I reminded her that Congress, for the good of the economy, had seen fit to give billions of dollars to the banking industry despite the mistakes it has made.  I said it might be appropriate if, in turn, Bank of America would not be so harsh on me (and others similarly situated).

All of this reasoning was to no avail.  My latest statement shows my APR is still at 26.99%.

I realize that technically I violated the rules of my cardholder agreement and that under normal circumstances I would just have to pay the price in higher interest rates (although, in my opinion Congress should never have allowed banks to charge such high rates in the first place).  But these are not normal times.  Under normal free-market “rules,” the government would allow financial institutions to fail.   But Congress has decided that the country cannot afford to play strictly by those old rules, and has instead paid huge amounts of money to banks and other corporations to shore up the system.   However, in their dealings with their own customers, it appears that banks want to keep playing by the same old “gotcha” rules.

Many economists believe that too many people are sending too much of their disposable income to banks in the form of high interest payments rather than spending their money in ways that would actually stimulate the economy.  I propose that we rectify that by making a bank’s receipt of additional rescue money conditional on that bank’s reducing to no more than 8% the APR the bank charges its unsecured creditors. I chose this rate because Bank of America has its headquarters in North Carolina, and 8% is North Carolina’s “legal rate”  -- the rate state law allows on judgments rendered in its courts. It is not the exorbitant rate that banks have become used to charging over the past few years, but it is certainly a reasonable rate of return, especially for an institution that would owe its continued existence to the Federal government’s gracious infusion of cash.

I also propose that when the FDIC takes over a bank, it lower the interest rate on unsecured debt owed to the bank to 8%, and that any debt that it sells to a third party include a condition limiting the APR that the third party may charge on that debt to 8%.

Some would say that reducing the rates as I propose would cut bank revenues and thereby create more problems for the banks.  That may not be true.  For example, many people who might otherwise stop making their payments at all in the face of such high interest rates would be encouraged to continue working to pay off their debts.  In any case, our economy cannot afford a banking model that has so many people chained to such high interest rates. The Federal government’s rescue of banks that charge those rates is counterproductive to the goal of getting our economy moving again.

Kenneth D. from Durham, North Carolina