Brown to Introduce Legislation Capping Interest Rates at 36%
Earlier this week, chairman of the Senate Banking Committee Sherrod Brown (D-Ohio) told Reuters that he is prioritizing legislation that would place a national 36 percent APR cap on loans. This announcement comes in addition to his efforts to repeal a rule from the Trump administration that consumer advocates claimed allowed payday lenders to bypass state interest rate caps. The Senate passed a resolution to overturn the so-called “True Lender” earlier this month.
“The next step is going to be putting a national cap on interest rates,” said Brown.
Along with Senator Jack Reed (D-R.I.), Brown introduced legislation during the previous Congress that would establish a national interest rate cap at 36 percent. While it did not gain headway, Brown is more confident in winning the necessary 60 votes now, as Democrats control the Senate for the first time since 2015.
On Wednesday, during a hearing with the CEOs of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo, Reed pressed the big bank CEOs on whether they would support a rate cap. While the CEOs did not commit to supporting such a cap, they said they would review any legislation.
According to the Consumer Federation of America, the median interest rate on small-dollar loans is between 25 and 38 percent. However, some short-term loans can have rates as high as 251 percent when annualized.
The Office of the Comptroller of the Currency (OCC) finalized the ‘true lender’ rule last October, which gave better clarity to partnerships between banks and fintech companies. But some Democrats and consumer advocates said that it permitted lenders to evade state usury laws by partnering with national banks that are not subject to tight interest rate rules.