Bipartisan 36 Percent Interest Rate Cap Bill Introduced in Congress Earns Praise from Stop The Debt Trap Coalition

The “Veterans and Consumers Fair Credit Act of 2019” would protect all Americans from predatory lending

Washington, DC – The Stop the Debt Trap coalition today applauded Reps. Jesús “Chuy” García (D-IL) and Glenn Grothman (R-WI) and Sens. Sherrod Brown (D-OH), Jeff Merkley (D-OR), Jack Reed (D-RI) and Chris Van Hollen (D-MD) for introducing the Veterans and Consumers Fair Credit Act of 2019, legislation that would expand the 36 percent Annual Percentage Rate (APR) cap on payday and car-title lenders found in the Military Lending Act (MLA), extending consumer protections beyond active-duty servicemembers and their families to all Americans.

Since the MLA does not apply to veterans or civilians, in many states they are exposed to payday, car title, and other triple-digit interest loans that trap people in debt. This bill would put an end to this type of predatory lending.

“America’s servicemen and women know that the rights they enjoy in uniform, such as the Military Lending Act, which is arguably the most successful consumer protection law on the books, is something that can help them maintain their financial readiness,” said Mike Saunders, director of military & consumer policy for Veterans Education Success. “But financial readiness is a lifelong goal, not just for when they are in uniform. Expanding the Military Lending Act to veterans, survivors and unactivated reservists, as well as all Americans, is a way of showing that everybody deserves to enjoy sound financial health, and a life free of the grinding misery of a debt trap.”

“With average annual interest rates of 486 percent APR in Wisconsin, payday loans are a debt trap, plain and simple,” said Peter Skopec, state director of the Wisconsin Public Interest Research Group (WISPIRG). “We’re thrilled to see the bipartisan leadership of Congressmen Grothman and García. Their work will help protect consumers from predatory loans that cause so much harm in our state and throughout the country.”

“Interest rate limits are the simplest and most effective protection against predatory lending,” said National Consumer Law Center Associate Director Lauren Saunders.” Most Americans would be shocked to learn that 100 percent APR loans are legal in many states.”

“For too long, payday and car-title lenders have been allowed to exploit the most vulnerable members of our communities,” said Linda Jun, senior policy counsel for Americans for Financial Reform. “As the current CFPB attempts to roll back guardrails to prevent this kind of abuse, Congress is taking the initiative to address the problem. This bill will establish nationwide safeguards to protect consumers from dangerous debt traps.”

“The nation should join the increasing number of states – both red and blue – that have put an end to APRs of 300 percent or more. Capping APRs at 36 percent would save millions of consumers from financial ruin,” said Brent Adams, Senior Vice President of Policy & Communication at Woodstock Institute.

“The cap on extortionate interest rates for our brave service members has worked to keep predatory lenders off their backs,” said Jeremy Funk, spokesman for Allied Progress. “Why not build on that success and afford the same common sense protections from financial ruin for military spouses, veterans and all hard working Americans? Plus, putting billions more dollars in consumers’ pockets will help grow the economy rather than predatory lender profits.”

“Predatory, unaffordable loans are burying people in debt. They cause people to lose their cars, bank accounts, and good health. The Veterans and Consumers Fair Credit Act would put an end to this gross exploitation,” said Center for Responsible Lending Senior Policy Counsel Rebecca Borné.

“Representatives García and Grothman’s legislation to cap out-of-control interest rates couldn’t have come at a better time. We fully support the efforts of these members of Congress to stand up for the rights of vulnerable borrowers and push back against the recent wave of shameful attacks on consumer protections—attacks led by industry-friendly Trump-appointees who have seized control of the very agencies tasked with protecting us and reining in predatory lenders,” said Linda Sherry, director of national priorities for Consumer Action.

“Working class and undocumented households in California have seen the devastating implications of triple digit interest rate loans,” said Paulina Gonzalez-Brito, executive director for California Reinvestment Coalition. “It was a positive step to see a reasonable cap on interest rates for loans in Sacramento this year. It’s time we protect everyday people from predatory loans that bury families further in debt across the nation.”

Additional Background

Sixteen states plus the District of Columbia, whose residents total nearly 100 million, already have interest rate caps of 36 percent or lower for short-term loans. A larger number of states have caps on longer-term loans. Importantly, the “Veterans and Consumers Fair Credit Act” would not preempt any provision of state law that establishes an interest rate cap lower than the 36 percent limit that this federal bill would establish.

This bill’s introduction coincides with an effort by political leadership of the Consumer Financial Protection Bureau (CFPB) to roll back protections on payday and car title loans. Voters have consistently opposed this move, as well as the CFPB’s decision to stop supervising banks and other lenders for compliance with the MLA, the existing law for service members.

In a recent Americans for Financial Reform/Center for Responsible Lending poll, a majority of respondents, across party lines, were concerned about stopping new protections for people who take out payday or car title loans, and 70 percent of respondents were specifically concerned about ending enforcement of rules that protect members of the military against abuse by payday lenders.


Stop The Debt Trap is a coalition of civil rights, consumer, labor, faith, veterans, seniors and community organizations from across the nation who are committed to ending payday loan debt traps