Advocates at the National Consumer Law
Center (NCLC) applauded today’s introduction in Congress of a bill to cap interest
rates nationwide at 36%, including fees, which NCLC is supporting on behalf of
its low-income clients.
“It is fitting
that as we celebrate Veterans’ Day that we honor our veterans by extending to them
and all Americans the same protection that our servicemembers receive: protection
against usurious loans that exceed 36% APR,” said Lauren Saunders, associate director of the National Consumer Law Center.
“Most Americans would be shocked to learn that today predatory lenders can legally
charge 100%, 200%, or even higher interest rates in many states. While a 36%
rate cap sounds high to most people, and it will not hurt legitimate
businesses, it will stop the most egregious forms of loan sharking. The 36% interest
rate cap goes back more than a century and is widely supported by the American public
on a bipartisan basis. Reasonable interest rate caps are the simplest most effective
protection against predatory lending.”
The Veterans and Consumers Fair Credit Act.(Act)
would stop high-cost predatory loans, and also prevent banks from getting back into
the payday loan business, by setting a maximum national rate of 36% APR including
fees on consumer loans. A few years ago,
banks were making “deposit advance” loans, aka bank payday loans, at rates over
200%, and with a change of leadership at the bank regulators, some banks are
thinking of returning to those loans. Currently there is no generally-applicable
national interest rate cap, though many states limit interest rates. In 2018, Colorado
joined a growing number of states, including South Dakota (2016) and Montana (2010),
whose voters have resoundingly passed initiatives on a bipartisan basis to cap interest
rates at 36% or less.
The Act is sponsored
in the Senate by Senators Merkley (D-OR), Brown (D-OH), Reed (D-RI), and Van Hollen
(D-MD); and in the U.S. House of Representatives by Reps. Grothman (R- WI) and
Chuy Garcia (D-IL).
The legislation
is modeled after the federal Military Lending Act, which caps loans to servicemembers
and their dependents at 36%. But the MLA does not cover veterans or other consumers.
“Importantly,
the Veterans and Consumers Fair
Credit Act would allow states to set a lower rate, which is especially important
for larger loans. While 36% is a reasonable rate for small loans, many states limit
a $10,000 loan to 25% APR or lower,” Saunders
added.
For more information:
·
Issue Brief: After
Payday Loans: How do Consumers Fare When States Restrict High-Cost Loans? Oct.
2018
·
Fact Sheet: State Annual Percentage Rate (APR)
Caps for $500, $2,000, and $10,000 Installment Loans, March
2019
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Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training. www.nclc.org
Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training. www.nclc.org
