New Interest Rate Bill Concerns
Monday, December 9, 2019
The House Financial Services Committee recently-introduced legislation to cap interest rates to 36% charged on most loans, essentially extending the same Military Lending Act (MLA) restrictions to all consumers. A 36% ceiling sounds fair, right? What could be wrong with that? As it turns out, plenty—in terms of unintended consequences and lessons yet to be learned.
DCUC articulated these concerns in a November 17, 2019 article
in which the 2015 MLA Amendments virtually eliminated small-dollar lending products to all military members. The 2015 MLA also disrupted the bond with those military members who are most at risk for predatory lending schemes. It is important to note that demand for small dollar loans has not decreased and no one, particularly the Department of Defense, is tracking where this demand is being met. The reality is that predatory lenders are still thriving in the shadows as a result of the MLA legislation.
The new bill, HR 5050, imposes the same restriction on small dollar lending. The proposed legislation would amend the Truth in Lending Act (TILA) to extend the MLA’s 36% APR cap to all consumers, covering payday, car-title and other types of loans to borrowers with difficult credit histories.
For now, the bill is still in committee. It was supposed to be marked up this week but is still short by a few votes. DCUC encourages all members to research the text of the bill
and contact your representative to alert them about these unintended consequences. It would also be beneficial to make the same case to your Senators as well.
DCUC will keep you apprised as this bill makes its way through the legislative process.