WASHINGTON— The National Consumer Law Center said it has joined more than 170 civil rights, consumer and community groups in endorsing federal legislation that would cap interest rates on most forms of consumer credit at 36% annually.
The proposal, known as the Predatory Lending Elimination Act, was introduced by Jack Reed (D-RI). The measure would establish a permanent 36% annual percentage rate cap, including fees, on consumer loans such as credit cards, installment loans, auto-title loans and payday loans.
If enacted, the bill would extend to all consumers the same 36% rate limit currently applied to loans made to active-duty servicemembers under the 2006 Military Lending Act.
‘The Affordability Crisis’
“There is bipartisan consensus that we need a national interest rate cap to address the affordability crisis,” Lauren Saunders, associate director of the National Consumer Law Center, said in a statement. She added the legislation would create a national ceiling while still allowing states to impose stricter limits.
According to the group, the bill would:
- Close what advocates describe as loopholes that allow lenders to add hidden fees.
- Adopt the same rate cap structure used for servicemembers under existing federal law.
- Prohibit so-called “rent-a-bank” arrangements that critics say enable lenders to charge triple-digit annual percentage rates.
- Preserve states’ authority to enact stronger consumer protections, including lower rate caps for larger loans.
What’s Exempt
The legislation would not apply to residential mortgages, auto purchase loans or loans made by federal credit unions.
As the CU Daily recently reported, NCUA has just extended for another 18 months the 18% interest rate cap for federal credit unions on most loans.
