SPONSORED:

Dems target payday lenders

Payday lenders are the target of new legislation that would cap the fees they charge low-income customers for short-term loans.

The Protecting Consumers from Unreasonable Credit Rates Act would restrict interest rates to no more than 36 percent in a move that would also affect companies that offer consumers other types of credit products. The bill was introduced Thursday by Democrats in the House and Senate.

"My consumer-friendly legislation would provide relief from exorbitant fees for many low-income consumers across the country, said Rep. Matt Cartwright (D-Pa.), who co-sponsored the House version of the bill. "Capping interest rates and fees for all consumers will not only protect working families, but also enable our economic recovery."

ADVERTISEMENT

The move comes as federal regulators are keeping a close eye on payday lenders, which offer short-term loans to low-income borrowers who can't get credit elsewhere, but charge exorbitant fees and interest rates. 

Senate Democrats, including Sherrod BrownSherrod Campbell BrownBiden moves to undo Trump trade legacy with EU deal How Biden can get the infrastructure bill through Congress Democrats reintroduce bill to create 'millionaires surtax' MORE (Ohio), have sounded the alarm on what they call a shady business model that puts consumers in harm's way. But Republicans say payday lenders that abide by the law provide low-income borrowers with much needed credit that they can't get anywhere else.

“Throughout my career, I have worked to shield people from those who would take advantage of them through predatory lending practices," said Rep. Steve Cohen (D-Tenn.), the other co-sponsor of the House bill. "Predatory lenders wreck people’s lives and perpetuate a cycle of indebtedness. Justice and morality dictates that reasonable caps on interest be enacted to protect borrowers from devious lenders.”

The legislation builds on a 2006 law that capped interest rates at 36 percent for military members and their families. But it also extends beyond payday lenders to companies that offer consumers other types of credit products. It would create stiff penalties for lenders that charger higher interest rates, as well. 

Sens. Dick DurbinDick DurbinOvernight Health Care: Takeaways on the Supreme Court's Obamacare decision | COVID-19 cost 5.5 million years of American life | Biden administration investing billions in antiviral pills for COVID-19 COVID-19 long-haulers press Congress for paid family leave Joe Manchin keeps Democrats guessing on sweeping election bill MORE (D-Ill.), Barbara BoxerBarbara Levy BoxerBottom line Trump administration halting imports of cotton, tomatoes from Uighur region of China Biden inaugural committee to refund former senator's donation due to foreign agent status MORE (D-Calif.), Richard Blumenthal (D-Conn.), Jeff MerkleyJeff MerkleyDemocrats scramble to unify before election bill brawl Schumer vows to only pass infrastructure package that is 'a strong, bold climate bill' Joe Manchin keeps Democrats guessing on sweeping election bill MORE (D-Ore.) and Sheldon WhitehouseSheldon WhitehouseCentrists gain leverage over progressives in Senate infrastructure battle Lawmakers rally around cyber legislation following string of attacks Graham, Whitehouse: Global transition to renewables would help national security MORE (D-R.I.) are all co-sponsoring the bill.

"For some, payday lenders offer a quick way to make ends meet, but often with devastating consequences," Durbin said. "With interest rates of 200 to 300 percent of value of the loan, these excessive rates and hidden fees have crippling effects on those who can afford it least. I am glad to be joined today by Reps. Cartwright and Cohen in taking action to help protect working families from these predatory lending practices.”

The lawmakers reported that predatory lenders collect about $27 billion each year in excessive fees and interest rates from about 12 million consumers. They said the interest rates can top 300 percent.