Senators seek to cap interest rates on consumer loans

Many states have already put some caps in place, the senators said, and the same ceiling is already in place for military personnel and their families.

Durbin has been pushing the legislation since 2009 and, along the way, has asked Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), to step in with better protections for consumers. 

In January, a group of Senate Democrats asked federal regulators to stop banks from making payday loans.

Sen. Jeff Merkley (D-Ore.) said his state has put caps in place and urged passage of a bill that would create nationwide limits. 

Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.) and Barbara Boxer (D-Calif.) also have signed onto the bill.

Efforts to tackle exorbitant interest rates have failed in the past because of the difficulty in defining predatory lending. 

In an effort to solve the problem, the bill would apply the 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.

By setting a relatively high interest rate as the cap and applying that cap to all credit transactions, the bill overcomes the problem by putting all consumer transactions on the same path. 

The measure ensures that federal law does not preempt stricter state laws and calls for creating specific penalties for violations of the new cap. 

The bill runs in tandem with other legislation that would ensure consumers have control over their own bank account, and end the tactics used by online lenders to evade enforcement of lending laws.  

On Tuesday, several interest groups delivered a petition signed by 157,000 people to the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to stop predatory lending and ensure federally chartered banks do not engage in the practice.