WASHINGTON (4/10/13)--Legislation that would impose a 36% maximum annual percentage rate cap on all open- and closed-end consumer credit transactions has been introduced in the U.S. Senate.
The bill, known as the Protecting Consumers from Unreasonable Credit Rates Act, would impact payday loans, mortgages, car loans, credit cards, overdraft loans, car title loans and refund anticipation loans, according to a release. The bill is co-sponsored by Sens. Richard Durbin (D-Ill.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.) and Barbara Boxer (D-Calif.).
The bill would allow lenders to continue to charge initial application fees, insufficient funds fees and late fees. Measures to ensure that the federal law does not preempt stricter state laws are included in the bill. The bill would penalize violations of the 36% cap.
Durbin, Blumenthal and Merkley were also among those that introduced a bill to ban certain harmful online payday lending practices earlier this year. That bill, the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act (S. 172), has five consponsors.
Credit unions and the Credit Union National Association are committed to providing safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders.
CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."
Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program.