Eliminate Entire Credit Card Debt When Bank Acts Like Loan Shark

Dan Engstrand lecturing at the Suffolk County Bar AssociationCredit card debt overwhelming; being sued in court by the bank, don’t want to file for bankruptcy protection, then fight back!  Many credit card companies act like loan sharks by unfairly hitting consumers with onerous default rates of interest at 29.99 percent or greater.  If you can show that the bank is charging you a usurious rate of interest, not only will their lawsuit be dismissed, but the entire underlying debt that the bank is seeking to collect upon will be discharged—meaning, you won’t have to pay back a cent!

New York sets criminal usury at a rate greater than twenty-five percent (25%).  Penal Law §190.40.  The civil usury rate is set at a rate greater than sixteen percent (16%).  N.Y. Banking Law §14-a.  A 29.99% interest rate is clearly usurious under New York law.  However, if the credit card issuer is a national bank (most of them are) federal law (29 U.S.C. §85) allows national banks to charge their “home state’s” interest rate, which in the case of credit card issuers is typically greater than New York’s usury limit.  If the issuer is a state chartered bank, then New York’s usury limits (see above) apply.

To determine if the credit card issuer is a national bank, log onto the United States Comptroller of the Currency website to see if the bank in question is a listed national bank (click onto List of Credit Card National Banks from U.S. Comptroller of the Currency or visit our "Useful Links" tab at the top of our website).  The United States Comptroller of the Currency regulates national banks, not the N.Y.S. Banking Department which only has jurisdiction over state banks.

If the credit card issuer is a national bank, which it probably is, the federal statute (29 U.S.C. §85) that allows it to charge a higher rate of interest than New York’s usury rate does not automatically preempt New York’s usury limits. 

Before a national bank is entitled to collect on an interest rate that exceeds New York’s usury limit, the national bank plaintiff must prove that “at least one significant non-ministerial action associated with the account took place in the ‘bank’s home’”. Citibank (S.D.), N.A. v. Hansen, 28 Misc.3d 195, 196, 902 N.Y.S.2d 299, 301 (Dist. Ct. Nassau County 2010).

It has long been the law in New York that usurious contracts are void and unenforceable.  Gen’l Oblig. Law §5-511.  Therefore, the bank’s failure to specify the law governing its right to recover 29.99% interest and to plead a non-ministerial act performed on the account in its “home state”, would make its contract usurious and unenforceable in New York. 

Our firm is experienced in consumer protection and we have successfully represented debtors being sued by credit card companies.