Federal Legislation Would Open the Door for Triple-Digit APR Loans to Enter States with Interest Rate Caps
WASHINGTON, D.C. – The House Financial Services Committee last night passed H.R. 3299, the so-called Madden bill, which would make it easier for payday lenders and other usurious lenders to use “rent‐a‐bank” schemes to charge distressed borrowers triple-digit interest rates that would otherwise violate state law. Among those threatened by this legislation and its Senate companion S. 1642 are more than 90 million Americans who live in states with interest-rate caps of 36% or lower on short term loans.
Last week, the Federal Reserve Bank of Cleveland released a report addressing several myths and raising serious concerns about peer‐to‐peer (P2P) lending, also widely known as marketplace lending. The findings underscore the case against H.R. 3299 / S.1642.
Center for Responsible Lending (CRL) Director of Federal Advocacy Scott Astrada released the following statement:
“This legislation would spring a debt trap for millions more low-income Americans across the country. Research shows that taking out a payday loan or another usurious loan makes borrowers more likely to enter a cycle of debt, to lose their bank accounts, to lose their car, to lose their homes, and to go bankrupt.
“The Cleveland Federal Reserve study shows that many loans from the much-hyped ‘FinTech’ sector are just as predatory as loans from neon-sign covered payday stores. Both are sold as a dream and turn into a nightmare.”
Additional resources:
- CBS News: Fintech critics call it predatory lending.
- Huffington Post: This Democrat Is About To Give Payday Lenders A Big Boost.
- CRL, the National Consumer Law Center, and more than 150 civil rights and consumer groups urge Members of Congress to reject H.R. 3299 and S. 1643.
- Map of U.S. Payday Interest Rates.
For more information or to arrange an interview with a CRL spokesperson, please contact Matthew Kravitz by replying to this email or calling 202-349-1859.
