Congressman Steve Cohen

Representing the 9th District of Tennessee

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

July 17, 2014
Press Release

[WASHINGTON, DC] – Congressmen Steve Cohen (TN-09) and Matt Cartwright (PA-17) today introduced 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, which can sometimes reach 300%. The bill 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 worked to shield people from those who would take advantage of them through predatory lending practices. Predatory lenders wreck people’s lives and perpetuate a cycle of indebtedness. 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.

“Predatory lending disproportionately harms economically disadvantaged individuals – people who are already struggling financially,” said Congressman Cartwright“This legislation would provide relief from exorbitant fees for many low-income consumers.  Capping interest rates and fees for 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. 

U.S. Senate Assistant Majority Leader Dick Durbin (D-IL) and Senators Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Sheldon Whitehouse (D-RI), and Barbara Boxer (D-CA) have also introduced this legislation in the Senate.

“As we continue moving toward economic recovery, too many of America’s working families continue to struggle,” said Senator Durbin. “For some, payday lenders offer a quick way to make ends meet, but often with devastating consequences.  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. I am glad to be joined today by Representatives Cartwright and Cohen in taking action to help protect working families from these predatory lending practices.”

38 organizations have endorsed the legislation including Americans for Financial Reform, the Center for Economic Integrity, the Center for Economic Justice, the Center for Responsible Lending, the Coalition of Religious Communities, Consumer Action, the Consumer Federation of America, Consumers Union, the NAACP, the National Consumer Law Center (on behalf of its low income clients), the National Fair Housing Alliance, and Public Citizen.