Bernie Sanders's Plan to Make Banking Affordable for Average Americans

By Gillian B. White, The Atlantic

06 January 16

In a speech on Tuesday, he said that there's a "special place in the Seventh Circle of Hell for those who charged people usurious interest rates."

ernie Sanders has made a name for himself by pushing in his presidential campaign for fundamental changes to the way financial institutions operate within the U.S.: He wants to reform the Federal Reserve, make ratings agencies nonprofits, and close the revolving door between Wall Street and government agencies. In a speech on Tuesday, he detailed plans—all of them highly ambitious, and many of them outside the purview of the president—that he hopes would make the banking system much more accessible to average Americans.

To Sanders, credit-card interest rates that top 20 percent and ATM fees as high as $5 are unacceptable. “The Bible has a term for this practice. It’s called usury. And in The Divine Comedy, Dante reserved a special place in the Seventh Circle of Hell for those who charged people usurious interest rates,” he said. Sanders said that if he were elected president, he’d push for a 15-percent cap on all credit-card interest rates and consumer loans, mirroring the rate cap credit unions must abide by for loans. And ATM fees, he said, shouldn’t be more than $2. “Big banks need to stop acting like loan sharks and start acting like responsible lenders,” he said.

Sanders’s plans represent an aggressive approach to rampant and growing economic inequality. But if he were elected president, his power to implement them would actually be quite limited. Many financial products are regulated at the state level, and when they aren’t, they are often governed by a federal agency such as the Consumer Financial Protection Bureau, notes Mehrsa Baradaran, a law professor at the University of Georgia. “There’s not much a president can do for some of these things. As far as tinkering around with those usury rates, that is far outside of the realm of the executive office,” she says. Instead, a president would have to push for this agenda and then encourage regulatory agencies to carry out the reforms.

One proposal that is within his power is the creation of a postal-banking system, which would have post offices offer some banking services. This would give Americans excluded from the mainstream consumer-financial system a more affordable option, one that is a safer alternative to payday lenders, which can charge customers interest rates as high as 300 percent.

Sanders has been a vocal critic of the way Wall Street operates and an ardent supporter of other politicians who want to reform America’s financial system. He’s been particularly supportive of the efforts Senator Elizabeth Warren, who helped establish the CFPB, the agency tasked with ensuring that financial institutions, from payday lenders to major banks, deal fairly and honestly with customers. The agency also investigates consumer complaints and comes up with rules for how banks and other finance outfits must deal with customers. Among their latest projects are efforts to regulate payday loans and pushing for fair and transparent lending practices. (The CFPB is one agency that actually has the power to implement some of the banking regulations that Sanders proposes.)

The banking industry, which makes a huge sum of money through fees for its services, would be strongly opposed to the firm regulations Sanders proposed on Tuesday. But in his speech, he hinted that he’s not only aware of this, but embraces it:  “Will they like me? No. Will they begin to play by the rules if I’m president? You better believe it.”