Whitehouse, Senators Introduce Bill To Protect Consumers From Predatory, High Cost Lending

Press Release

U.S. Senator Sheldon Whitehouse (D-RI), along with Senators Dick Durbin (D-IL), Jeff Merkley (D-OR), and Richard Blumenthal (D-CT), have 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 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.

"Payday lenders make their money through ultra-high interest rates and fees paid by the people who can least afford it," said Whitehouse. "This bill would impose sensible limits to help end the inescapable cycle of debt too many Americans currently face. In the long run, we need to restore states' rights to set usury limits and protect home state consumers from lending abuse."

"It is time for federal legislation that cracks down on predatory lending and closes loopholes used to exploit hard-working Americans. 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. Too many Americans suffer long-term financial harm from these predatory loans and deceptive tactics, and we must put an end to it," Durbin said.

"Back in 2007, we kicked payday lenders--who prey on families when they're at some of the most vulnerable times in their lives--out of Oregon," said Merkley. "Americans in every corner of this country deserve the same protections from these lenders' predatory practices. Let's make this the year that Congress passes the Protecting Consumers from Unreasonable Credit Rates Act, so we can stand up to these lenders and help ensure that Americans seeking to recover from the economic impacts of the coronavirus crisis are not lured into a vortex of debt."

In 2006, Congress put into place a federal 36 percent annualized usury cap for certain credit products marketed to service members and their families. That limit has 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, but there is no national interest rate limit.

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, the Protecting Consumers from Unreasonable Credit Rates Act would:

Establish a maximum APR of 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;
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 (CRL), Consumer Federation of America, National Consumer Law Center (on behalf of its low-income clients), Woodstock Institute, and Shriver Center on Poverty Law.