Merkley bill targets high credit rates, fees
Sen. Jeff Merkley, D-Ore., on Tuesday joined Assistant Majority Leader Dick Durbin (D-IL), Richard Blumenthal (D-CT) Sheldon Whitehouse (D-RI) and Barbara Boxer (D-CA), to introduce the Protecting Consumers from Unreasonable Credit Rates Act.
The bill aims to eliminate the excessive rates and fees that some consumers are charged for payday loans, car title loans and other types of credit.
The bill would create an interest rate and fee cap of 36% for all consumer credit transactions, putting an end to the excessive rates which can top 300%. The 36% cap is similar to usury laws already enacted in many states and is the same as the cap already in place for military personnel and their families.
"Working families deserve better than to have their wealth stripped away through predatory and deceptive practices. In Oregon, we took on the payday lenders and limited the outrageous interest they were charging. Those limits should be the standard nationwide,” Merkley said.
Efforts to address the exorbitant interest rates charged on many payday loans have often failed because of the difficulty in defining predatory lending.
By setting a relatively high interest rate as the cap and applying that cap to all credit transactions, the Protecting Consumers from Unreasonable Credit Rates Act overcomes the problem and puts all consumer transactions on the same, sustainable, path. In doing so, consumers are protected, predatory lending practices are ended and consumers will be helped in using credit more wisely.
Specifically, the Protecting Consumers from Unreasonable Credit Rates Act would:
- Establish a maximum APR equal to 36% and apply this cap to all open-end and closed-end consumer credit transactions, including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans, and payday loans.
- Encourage the creation of responsible alternatives to small dollar lending, by allowing initial application fees and for ongoing lender costs such as insufficient funds fees and late fees.
--Ensure that this federal law does not preempt stricter state laws.
--Create specific penalties for violations of the new cap and supports enforcement in civil courts and by State Attorneys General.
Merkley, Durbin, Blumenthal, and others have also sponsored the SAFE Lending Act (S. 172), which would close loopholes, ensure consumers have control over their own bank account, and end the other tricks and traps that online lenders use to evade enforcement of common sense lending laws.
The Protecting Consumers from Unreasonable Credit Rates Act is supported by 40 national and state groups, including the Americans for Financial Reform, Consumer Federation of American, the National Consumer Law Center, the Center for Responsible Lending, and Consumers Union.
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