WASHINGTON–Legislation that has been introduced in the Senate is being praised by one consumer organization even as credit unions have expressed opposition to it.
The Consumers Fair Credit Act was introduced in the Senate by Jack Reed (D-RI), Sen. Jeff Merkley (D-OR), Sen Sherrod Brown (D-OH), and Sen. Chris Van Hollen (D-MD), along with seven other original co-sponsors. It would cap interest rates at 36%.
“Interest rate limits are the simplest, most effective way to stop predatory lending and to ensure that lenders make responsible loans that people can afford to repay without getting caught in a debt trap,” said National Consumer Law Center Associate Director Lauren Saunders. “A national 36% interest rate cap that covers all lenders, including banks, and all borrowers, including veterans and other consumers, will prevent predatory lenders from evading state interest rate limits and give everyone the same protections that our active military families already enjoy. The 36% interest rate limit is the broadly accepted dividing line between responsible lending and destructive credit that harms lives and destroys financial inclusion.”
What Bill Would Do
According to the organization, the Veterans and Consumers Fair Credit Act would eliminate high-cost, predatory payday loans, auto-title loans, and similar forms of toxic credit across the nation by:
- Establishing a simple, common sense limit that is broadly supported by the public on a bipartisan basis
- Preventing hidden fees and loopholes
- Simplifying compliance by adopting a standard that lenders already understand and use
- Upholding the ability of states to adopt stronger protections as needed, such as lower rates for larger loans
The Veterans and Consumers Fair Credit Act extends the federal Military Lending Act’s (MLA) 36% interest rate cap on consumer loans to all Americans, including veterans and Gold Star Families
According to the NCLC, polling data show that voters across the political spectrum strongly support interest rate limits.
As CUToday.info reported here, both CUNA and NAFCU have come out in opposition of the bill.