What We Owe

[Passages]

The big banks behind the rising cost of credit

BY KALENA THOMHAVE JUNE 11, 2024

Melissa Marquez is not your typical banker. She rails against the globalization of big finance and the concentration of the financial sector through mergers and acquisitions. She calls high interest rates “obscene.” Her financial institution has issued mortgages for 42 years but has never once foreclosed on anyone.

To be fair, Marquez doesn’t technically work for a bank; she’s the CEO of a credit union. And Genesee Co-Op Federal Credit Union in Rochester, New York, is different even from most credit unions.

“We really try to help create wealth for low-income people,” says Marquez, explaining that as a result, interest rates and fees need to be low. “Otherwise, you’re just extracting money, not helping build wealth.” Genesee Co-Op FCU is a community development financial institution, meaning serving low-income people is part of the organization’s mission.

SNIP
A recent study published by the Consumer Financial Protection Bureau (CFPB) suggests something similar happening in finance. The APR margin is the difference between the average APR and the prime lending rate, which is influenced by the federal funds rate, what the Fed tinkers with when it wants to lower inflation. About half of the increase in credit card interest rates over the past decade can be attributed to higher APR margins—bigger differences between the cost of lending and the average interest rate. That translates, the CFPB estimates, into an additional $250 in payments on the average credit card balance in 2023.
https://prospect.org/economy/2024-06-11-what-we-owe/