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."
Senate Democrats, including Sherrod BrownSherrod BrownSenate fight over miners' heathcare boils over Brown-Mandel Ohio Senate race will be brutal referendum on Trumpism Ohio Republican announces 2018 challenge to Sherrod Brown 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 DurbinDem senator threatens to slow-walk spending bill Graham, Durbin 'encouraged' by Trump's comments on Dreamers GOP eager to see Harry Reid go MORE (D-Ill.), Barbara BoxerBarbara BoxerFight over water bill heats up in Senate Dem senator tears up in farewell speech Overnight Energy: Senate Dems set to fight water bill MORE (D-Calif.), Richard BlumenthalRichard BlumenthalOvernight Tech: AT&T, Time Warner CEOs defend merger before Congress | More tech execs join Trump team | Republican details path to undoing net neutrality Overnight Energy: Trump taps EPA foe to head agency | Energy reform bill officially dead CNN’s parent company promises to defend journalistic independence MORE (D-Conn.), Jeff MerkleyJeff MerkleyDem senator to Trump: 'You have no mandate' GOP senators wary of nuking filibuster Dem senators charge: Trump not draining the swamp MORE (D-Ore.) and Sheldon WhitehouseSheldon WhitehouseGOP wants to move fast on Sessions Dem senator backing Sessions for attorney general Dems pledge to fight Sessions nomination 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.