A bill has been introduced in the US Senate that would cap charges and interest on consumer loans at an annual percentage rate (APR) of 36%.
This is the same limit in place for military personnel and their families, lawmakers said. In 2006, Congress imposed a federal annualized usury cap of 36% on certain credit products marketed to military personnel and their families. Over the years, this has reduced payday loans, car titles, and tax refunds around military bases.
“Payday lenders make their money off ultra-high interest rates and fees paid by the people who can least afford it,” said US Senator Sheldon Whitehouse (D-RI), one sponsors of the bill. âThis bill would impose reasonable limits to help end the inevitable cycle of debt that too many Americans are currently facing. In the long run, we must restore the right of states to set usury limits and to protect home state consumers from credit abuse. “
Along with Whitehouse (D-RI), the legislation is also sponsored by American senses Dick Durbin (D-IL), Jeff Merkley (D-OR) and Richard Blumenthal (D-CT).
“It’s time for federal legislation to crack down on predatory lending and fill in the loopholes used to exploit hard-working Americans.” The Protecting Consumers From Unreasonable Credit Rates Act would eliminate high-cost payday loans and other expensive forms of credit that trap vulnerable consumers in endless debt cycles. Too many Americans are suffering long-term financial damage from these predatory loans and deceptive tactics, and we must stop it, âDurbin said.
Various federal and state loopholes allow lenders to charge high interest rates, up to 400% for payday loans, 300% for auto title loans and up to 17,000% for bank overdrafts.
This bill would establish a maximum APR of 36% and apply that limit to all open-ended and closed consumer credit transactions, including payday loans, auto title loans, overdrafts, credit cards. , auto loans, mortgages, and prepayment loans. . In addition, it would ensure that this federal law does not prejudge more stringent state laws. It would also create specific sanctions for violations of the new ceiling and the application of child support by civil courts and by state attorneys general.
âIn 2007, we kicked out payday lenders from Oregon, who prey on families when they are in the most vulnerable times of their lives,â Merkley said. âAmericans all over this country deserve the same protections against the predatory practices of these lenders. Let’s get Congress to pass the Consumer Protection from Unreasonable Credit Rates Act so we can stand up to these lenders and help ensure that Americans seeking to recover from the economic impacts of the coronavirus crisis are not not drawn into a debt vortex. “
The bill is approved by Americans for Financial Reform, Center for Responsible Lending, Consumer Federation of America, National Consumer Law Center, Woodstock Institute, and Shriver Center on Poverty Law.