Cohen, Cartwright & Durbin Introduce Bill to Crack Down On Predatory, Excessive Interest Rates and Fees

March 24, 2015
Press Release

[WASHINGTON, DC] – Congressmen Steve Cohen (TN-09) and Matt Cartwright (PA-17) today reintroduced the Protecting Consumers from Unreasonable Credit Rates Act, which would cap fees and interest rates that predatory lenders charge on payday loans and other consumer credit products like car title loans that can sometimes reach 300%. The bill, which Senator Dick Durbin (D-IL) also introduced in the Senate today, would limit interest rates and fees at 36% for all consumer credit transactions, the same rate cap that is already protecting military personnel and their families.

“Throughout my career, I have always worked to shield people from those who would take advantage of them through predatory lending practices that can wreak havoc on people’s lives and perpetuate a cycle of indebtedness. Both justice and morality dictate that reasonable caps on interest be enacted to protect borrowers from devious lenders,” said Congressman Cohen.

In 2006, Congress enacted a federal 36% annualized usury cap for certain credit products marketed to servicemembers and their families.  The Protecting Consumers from Unreasonable Credit Rates Act would extend that maximum cap of 36% to all consumer credit transactions—including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans, and payday loans—for all consumers. The federal cap would not preempt stricter state laws. The bill would also encourage the creation of responsible alternatives to small dollar lending. To ensure compliance with the cap, the bill would create specific penalties for violations and support enforcement in civil courts and by State Attorneys General.

“Pennsylvania recognizes that predatory lending disproportionately harms economically disadvantaged individuals – people who are already struggling financially,” said Congressman Cartwright. “My consumer-friendly legislation would provide relief from exorbitant fees for many low-income consumers across the country.  Capping interest rates and fees for all consumers will not only protect working families but also enable our economic recovery.”

Predatory lending – defined by the Federal Deposit Insurance Corporation as the practice of “imposing unfair and abusive loan terms on borrowers” – extracts approximately $27 billion in excessive fees and interest from 12 million Americans each year due to excessive rates which can top 300%, according to the Center for Responsible Lending. 

“Despite the economic gains we have made as a nation in recent years, many working families continue to struggle. For some, payday lenders offer a quick way to make ends meet, but often with devastating consequences,” said Senator Durbin. “With interest rates of two and three hundred percent of value of the loan, these excessive rates and hidden fees have crippling effects on those who can afford it least. Capping interest rates and fees for consumers will help protect working families from these predatory lending practices—it’s the right thing to do.”

This legislation is supported by the Center for Economic Integrity, Center for Responsible Lending, Demos, NAACP, and Public Citizen.