Senate panel weighs proposal to cap payday loan interest rates at 36% – FOX23 News

Every year, millions of Americans turn to payday loans to cover emergency expenses or late-paying expenses, but these loans often come with high interest rates.

Congress is now considering a proposal to cap the annual percentage rate (APR) at 36% for all consumers.

This is already in effect for service members and their families.

Proponents say extending the cap for everyone will help protect consumers who face double- or triple-digit interest rates.

“That’s the debt trap and that’s how payday lenders succeed by making sure their customers fail,” said Ashley Harrington of the Center for Responsible Lending.

The law “protecting consumers against unreasonable credit rates” would apply to payday loans, car title loans, credit cards and more.

“Payday lenders don’t provide the access to responsible credit that consumers can afford,” said Sen. Sherrod Brown (D-Ohio). “They suggest the opposite. Products that trap consumers in a cycle of debt.

More than a dozen states already have their own interest rate caps.

Legislation to make it a national standard is supported by Democrats and some Republicans.

“While I normally don’t like the federal government to regulate business, the fact that so many loans are online today leaves us with no choice,” said Rep. Glenn Grothman (R-Wisc.). “I think sometimes the Americans least able to afford it lose huge amounts of interest.”

But other Republicans have opposed the government setting market standards.

“History is littered with government planners and their failed attempts to circumvent markets and fix prices,” said Sen. Pat Toomey (R-Penn.).

“They generate huge unintended consequences and inevitably harm the very people they are meant to be trying to protect.”

Critics said people in need of loans would end up losing options under the proposal.

“A national interest rate cap of 36% would be devastating to my constituents,” said Rep. Barry Loudermilk (R-Georgia). “Many lenders would simply no longer offer small loans or consumers would be forced to borrow more money than they need or have a longer term loan.”

Bernadine J. Perkins