09.06.23

Durbin Leads Colleagues In Introducing Bill To Protect Consumers From Predatory, High Cost Lending

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senators Jeff Merkley (D-OR), Richard Blumenthal (D-CT), and Sheldon Whitehouse (D-RI) today introduced legislation that would cap fees and interest on consumer loans at an Annual Percentage Rate (APR) of 36 percent—the same limit currently in place for loans marketed to military service members and their families.  Studies show that while lenders today offer easy credit, these transactions often come with high interest rates, steep late fees, and other hidden charges.  This predatory business model exploits hard-working Americans, trapping them in long-term debt cycles that drain bank accounts and cause serious, long-term financial harm.

“Too many Americans suffer long-term financial harm from predatory loans and deceptive tactics.  We need federal legislation that cracks down on predatory lending and closes loopholes used to exploit hard-working Americans,” Durbin said.  “The Protecting Consumers from Unreasonable Credit Rates Act would eliminate high-cost payday loans and other costly forms of credit that trap vulnerable consumers in endless debt cycles.”           

“Predatory loans with outrageous interest rates trap working families in a vortex of debt,” said Merkley. “In Oregon, we took on the payday lenders and limited the outrageous interest they were charging. This bill’s simple and straightforward approach will help ensure families aren’t bankrupted by high interest rates by empowering states with strong laws, like Oregon, to actually protect consumers.”

“Consumers should be able to access affordable loans without taking on crushing debt,” said Blumenthal. “This legislation is commonsense—targeting the exorbitant fees and interest rates levied against families and their mortgage, credit card, and car payments. Americans deserve these protections against predatory, profiteering lenders.”    

“High cost, predatory lending hurts hard-working Americans each day,” said Whitehouse.  “Our legislation puts a cap on consumer loan interest rates to protect borrowers and will help reduce debt for families across the country.”

In 2006, Congress enacted a federal 36 percent annualized usury cap for certain credit products marketed to service members and their families, which curbed payday, car title, and tax refund lending around military bases.  Eighteen states and the District of Columbia have enacted usury laws that protect borrowers from high-cost payday loans and other costly forms of credit. 

Various federal and state loopholes allow unscrupulous lenders to charge cash-strapped consumers 400 percent APR for payday loans on average, 300 percent APR for car title loans, and up to 17,000 percent APR for bank overdraft loans.

To protect consumers from predatory lending practices, the Protecting Consumers from Unreasonable Credit Rates Act would:

  • Establish a maximum APR equal to 36 percent and apply this cap to all open-end and closed-end consumer credit transactions, including payday loans, car title loans, overdraft loans, credit cards, car loans, mortgages, and refund anticipation loans;
  • Encourage the creation of responsible alternatives to small dollar lending by providing tolerances for initial application fees and ongoing lender costs;
  • Ensure that this federal law does not preempt stricter state laws; and,
  • Create specific penalties for violations of the new cap and support enforcement in civil courts and by State Attorneys General.

The legislation is endorsed by Americans for Financial Reform, Center for Responsible Lending, Consumer Federation of America, National Consumer Law Center (on behalf of its low income clients), Woodstock Institute, American Fintech Council, AgeGuide Northeastern Illinois, Brighton Park Neighborhood Council, Capital Good Fund, Chicago Jobs Council, Citizen Action/Illinois, Housing Action Illinois, IL PIRG, Illinois Chapter of the National Association of Consumer Advocates (NACA), Jewish Free Loan Chicago, Metropolitan Family Services, National Association of Consumer Advocates (NACA), Northwest Side Community Development Corporation, Revolution Workshop, and Shriver Center on Poverty Law.

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