Here's a little background info on the Protecting Consumers from Unreasonable Credit Rates Act:Sen. Jeff Merkley, D-Ore., on Tuesday joined Assistant Majority Leader Dick Durbin (D-IL), Richard Blumenthal (D-CT) Sheldon Whitehouse (D-RI) and Barbara Boxer (D-CA), to introduce the Protecting Consumers from Unreasonable Credit Rates Act.
The bill aims to eliminate the excessive rates and fees that some consumers are charged for payday loans, car title loans and other types of credit.
The bill would create an interest rate and fee cap of 36% for all consumer credit transactions, putting an end to the excessive rates which can top 300%. The 36% cap is similar to usury laws already enacted in many states and is the same as the cap already in place for military personnel and their families.
"Working families deserve better than to have their wealth stripped away through predatory and deceptive practices. In Oregon, we took on the payday lenders and limited the outrageous interest they were charging. Those limits should be the standard nationwide,” Merkley said. - KTVZ, 4/9/13
Here are the specifics of the bill:Durbin has been pushing the legislation since 2009 and, along the way, has asked Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), to step in with better protections for consumers.
In January, a group of Senate Democrats asked federal regulators to stop banks from making payday loans.
Sen. Jeff Merkley (D-Ore.) said his state has put caps in place and urged passage of a bill that would create nationwide limits.
Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.) and Barbara Boxer (D-Calif.) also have signed onto the bill.
Efforts to tackle exorbitant interest rates have failed in the past because of the difficulty in defining predatory lending.
In an effort to solve the problem, the bill would apply the cap to all open-end and closed-end consumer credit transactions, including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans and payday loans.
By setting a relatively high interest rate as the cap and applying that cap to all credit transactions, the bill overcomes the problem by putting all consumer transactions on the same path.
The measure ensures that federal law does not preempt stricter state laws and calls for creating specific penalties for violations of the new cap.
The bill runs in tandem with other legislation that would ensure consumers have control over their own bank account, and end the tactics used by online lenders to evade enforcement of lending laws. - The Hill, 4/9/13
Specifically, the Protecting Consumers from Unreasonable Credit Rates Act would:You can read the whole bill here:
Establishes a maximum APR equal to 36% and apply this cap to all open-end and closed-end consumer credit transactions, including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans, and payday loans.
Encourage the creation of responsible alternatives to small dollar lending, by allowing initial application fees and for ongoing lender costs such as insufficient funds fees and late fees.
Ensure that this federal law does not preempt stricter state laws.
Create specific penalties for violations of the new cap and supports enforcement in civil courts and by State Attorneys General. - eNews Park Forest, 4/9/13
Liz Ryan Murray, policy director for National People's Action, makes a pretty compelling argument for the Protecting Consumers from Unreasonable Credit Rates Act:
I too thank Senators Merkley and Durbin for their continued efforts to in looking out for consumers. If you'd like to get more info on the bill, please contact either Merkley or Durbin's offices to get more info:Today Senator Dick Durbin is reintroducing a critical bill that will cap interest rates on predatory credit. The “Protecting Consumers from Unreasonable Credit Rates Act” is a desperately needed law that will finally crack down on strip mall loan sharks and shady internet lenders alike, but it would also put the brakes on the dirty little secret of the predatory lending industry: big bank payday lending.
Some of America’s largest banks, back to record profitability after the bail-outs, have started offering their own customers triple digit interest payday loans with names like “Direct Deposit Advance.” These short term, high interest loans, commonly known as “payday loans” are decimating the bank accounts of some of America’s most vulnerable residents and they must be stopped.
Big banks like Wells Fargo and U.S. Bank are taking advantage of the economic desperation of American’s most vulnerable to line their pockets, and it is shameful. According to recent research published by the Center for Responsible lending, a full 25 percent of bank payday loans are to recipients of Social Security — most of whom are seniors or people with disabilities.
When Social Security recipients take out a bank payday loan, the bank takes an average of 33 percent of their next deposit, often income for the entire month, to pay back the loan and fee. For context, the average retired senior on Social Security is getting $1,186/ month — leaving them with just $794.62 to live on. - The Hill, 4/9/13
And please do contribute to Merkley's re-election campaign: