By Vicki Needham - 07/27/12 05:11 PM EDT
“These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least."
Durbin’s bill would establish a new Fee and Interest Rate (FAIR) calculation that includes all interest and fees and creates a cap of 36 percent for all consumer credit transactions including mortgages, car loans, credit cards, overdraft loans, car title loans and payday loans.
That rate is similar to usury caps already enacted in many states and is the same level already in place for military personnel and their families.
Durbin’s bill aims to eliminate the difficulty of defining predatory lending by setting a relatively high interest rate as the cap and applying that cap to all credit transactions.
The measure also is designed to encourage the creation of responsible alternatives to small-dollar lending, ensure the federal law does not preempt stricter state laws and create specific penalties for violations of the new cap.
Sens. Jeff Merkley (D-Ore.), Sheldon Whitehouse (D-R.I.) and Barbar Boxer (D-Calif.) are cosponsoring the measure.