April 14, 2010
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News: Massachusetts Means Business
Massachusetts State Officials are done talking and have taken action against credit card companies that continued to stomp and romp on innocent card customers. The state will begin moving over $212 million from deposits in Bank of America, Citi Bank and Wells Fargo because the banks have refused to cap credit card interest rates lower than 18 percent. Banks that are based outside the boundaries of the state are not bound by law to comply with Massachusetts' usury law which caps credit card and loan interest rates at 18 percent. Timothy Cahill, State Treasurer, said the decision was made by the staff and Fidelity Investments in response to a request by the Greater Interfaith Organization (GIO). As a nonprofit organization, the GIO advocated for financial reform.
Cahill said the state was looking for a smooth transition and could take up to six months to move the funds to prevent any investment losses. At this time, Cahill didn't have an answer on where the money would be invested. The move will cost Bank of America Corp. over $200 million in loss deposits. Public Policy Director for the credit card giant, James Mahoney said the action would be costly and ineffective for the bank to be managed on state by state bases. Furthermore, Mahoney noted that approximately 70 percent of their customers have credit card interest rates under 15 percent.
Cheri Andes, Executive Director of the Boston chapter of the GIO said Massachusetts is the first state to take action against the credit card and loan industry. However, over 300 religious leaders from seven states will embark on Washington DC in support of an Interest Rate Reduction Act that would implement an interest rate cap at 15 percent. Andes met with Bank of America representatives last week asking them to voluntarily cooperate with the cap; however, the bank refused saying it would require too many changes. The long and short of it; the action will bring the banking business back to the neighborhood where it belongs