A Cap that Consumers Would Love to Wear


Politics can be confusing and frustrating for many.  In order for laws to be passed there must be discussion, negotiation, politicking, and the like.  The process of how a bill becomes a law in Washington (for those of you who remember Schoolhouse Rock click here for a quick and familiar recap) can be long and winding.  Sometimes a bill just makes sense and should earn overwhelming support.  I submit such is the case with a bill recently introduced in the United States Senate:  S. 673 which  is aptly titled “Protecting Consumers from Unreasonable Credit Rates Act.”  The bill would set a maximum legal interest rate of 36% per year on all consumer loans.  One significant feature of the bill is that violators of the 36% interest rate cap would face one year in prison and a fine of either Possible Good News for Consumers!three times the amount of the debt involved or $50,000.00.  Think that would get someone’s attention?  Yikes!

Most vehicle loans and credit cards and other retail loans have interest rates below the 36% threshold.   And many states have laws regulating interest rates and other essential terms of financing.  However, one industry that is notorious for high interest rates (a/k/a legalized loan-sharking) is the payday lending industry.  Annual percentage rates on payday loans are frequently in the triple digit range and these loans are often given to persons who ultimately fall into a downward spiral of burdensome debt. 

As is the case with politics and the legislative process somebody is probably unhappy about the prospect of this bill becoming a law.  The “somebody” is likely the thousands of payday lenders and other entities that provide funds at exorbitant interest rates.  We will see how they react to this bill and let us study the debate and discussion that ensues in the House and, if the bill advances, to the Senate.  For those of you who are keeping political score, the Republicans control the House and the Democrats control the Senate.  And our President is a Democrat.

Having a national cap on interest rates is a good thing.  It will protect consumers and weed out some of the true rogue lenders.  Let’s hope this bill becomes a law………for the good of our country.

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