Durbin Statement On White House, CFPB Effort To Crack Down On Predatory Lending Practices
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) released the following statement today after the Consumer Financial Protection Bureau (CFPB) announced plans for stronger regulations on payday lenders. President Obama is expected to address the issue in a speech later today.
“For some unfortunate Americans, including our military families, payday lenders offer a quick way to make ends meet, but often with devastating consequences,” said Durbin. “The Consumer Financial Protection Bureau was created to crack down on these predatory lending practices and provide financial protections to consumers who fall victim to them. Placing strong federal rules on payday lenders is the right thing to do. We must protect working families and prevent consumers from falling helplessly into debt traps.”
On Tuesday, Durbin and U.S. Senators Barbara Boxer (D-CA), Jeff Merkley (D-OR), Richard Blumenthal (D-CT) and Sheldon Whitehouse (D-RI) introduced the Protecting Consumers from Unreasonable Credit Rates Act - a bill to eliminate the excessive rates and fees that some consumers are charged for payday loans, car title loans and other types of credit.
The bill - introduced in the House of Representatives by U.S. Representatives Matt Cartwright (D-PA) and Steve Cohen (D-TN) - would create an interest rate and fee cap of 36% for all consumer credit transactions, putting an end to the excessive rates which can top 300%. The 36% cap is similar to usury laws already enacted in many states and is the same as the cap already in place for military personnel and their families.
Efforts to address the exorbitant interest rates charged on many payday loans have often failed because of the difficulty in defining predatory lending. By setting a relatively high interest rate as the cap and applying that cap to all credit transactions, the Protecting Consumers from Unreasonable Credit Rates Act overcomes the problem and puts all consumer transactions on the same, sustainable, path. In doing so, consumers are protected, predatory lending practices are ended and consumers will be helped in using credit more wisely.
Specifically, the Protecting Consumers from Unreasonable Credit Rates Act would:
- Establishes a maximum APR equal to 36% and apply this 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.
- Encourage the creation of responsible alternatives to small dollar lending, by allowing initial application fees and for ongoing lender costs such as insufficient funds fees and late fees.
- Ensure that this federal law does not preempt stricter state laws.
- Create specific penalties for violations of the new cap and supports enforcement in civil courts and by State Attorneys General.
Protecting Consumers from Unreasonable Credit Rates Act is supported by 70 national and state groups, including the Americans for Financial Reform, Consumer Federation of American, Public Citizen, the Center for Responsible Lending, and Consumers Union.
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