For much of human history usury laws have been in place -- rules that prohibit charging unreasonably high rates of interest on loans. Christianity, Islam and Judaism all prohibit the practice because usury takes advantage of others and is unfair. For many years the United States had state usury laws which kept interest rates low.
Then came the 1978 Supreme Court decision Marquette v. First of Omaha Service Corp., which blew the lid off interest rate ceilings. The court ruled that rates could be decided based not on where the borrower lived, but where the credit decision was made -- essentially, banks could "export" their interest rates by setting up operations elsewhere. In states like South Dakota and Delaware, which eliminated interest rate caps, banks set up credit card operations, loaned out billions and credit card usage soared.
And for most of the next three decades, Congress approved further bank deregulation.
During the late '70s when the Marquette decision came down, inflation was high, banks were bound by usury laws, and they paid more to borrow money than they made lending it out. But the prime rate peaked in 1980 -- 21.5 percent -- and today it's near a historic low. Yet interest rates on credit cards haven't come back down.
Jim Blaine, CEO of the North Carolina State Employees Credit Union told FRONTLINE, "If I'm able in 2009, to buy money in the marketplace for zero, I'm not quite sure why I should be allowed to charge 30 percent."
In FRONTLINE's reporting for The Card Game, we asked a number of people what they thought of interest rate caps. [See video above.] If credit unions have a limit of 18 percent, could credit unions become a model for how to bring back reasonable rates on consumer lending?
Washington isn't showing much enthusiasm on capping rates. The Obama administration doesn't support the idea, members of Congress are leery of it, and the banking lobby loathes it.
In March 2009, one senator we spoke to -- Bernie Sanders, an Independent from Vermont -- introduced legislation that would cap most interest rates at 15 percent. He was able to bring it to the floor for a roll call vote two months later, when debate on the credit card bill was in full swing. It was shot down 33-60. His bill now sits in the Senate Banking Committee, where it will likely stay, unless it gets taken up by the committee or he moves it to the floor in another procedural maneuver.
Zachary Stauffer is a journalist with the Investigative Reporting Program in Berkeley, California. He is also a freelance director of photography who works regularly with FRONTLINE and FRONTLINE/World.