WASHINGTON—NAFCU and CUNA have sent a joint letter to Senate leadership “flagging the consequences” of a new amendment to the proposed government funding “minibus” that would extend Military Lending Act (MLA) provisions to all consumers.
The amendment, from Sens. Jack Reed (D-RI) and Jeff Merkley (D-OR), would impose the MLA’s annual percentage rate (APR) cap of 36% to all consumer loan products and “completely change the methodology used to calculate interest rates for non-servicemember consumers.”
“While seemingly an innocuous technical change, the broad impact of an all-in APR cap on credit cards and small dollar loans would be seismic,” wrote NAFCU President and CEO Dan Berger and CUNA President and CEO Jim Nussle.
According to the letter, the adoption of the proposal would require lenders to offer larger, longer-term loans – effectively encouraging borrowers to take on more debt and potentially forcing borrowers with lower creditworthiness out of the market for short-term, small dollar loans.
‘Critical to Help People’
“Small dollar loans, credit cards, and other forms of short-term credit are critical to help people meet emergency expenses, disruptions in pay, and misalignments in the timing of their expenses and income,” Berger and Nussle said. “This amendment’s proposed 36% fee and interest cap would make it more difficult for many consumers to obtain credit, thereby harming the very consumers the legislation seeks to protect. Congress should reject these legislative measures.”
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