Rate Cap Bill Won’t Be Considered This Year After Moderate Democrats Express Concerns
Legislation introduced by Reps. Jesus “Chuy” Garcia (D-Ill.) and Glen Grothman (R-Wisc.) that would ban all loans above a 36 percent APR was not considered in the House Financial Services Committee markup this week, meaning that it will not come before the committee before the end of the year.
According to American Banker, the reason for this was that moderate Democratic members on the committee opposed the bill, expressing concerns that it would cut off access to credit to consumers in their districts.
“There was more widespread concern about the impact of the rate cap on consumers’ access to credit than [Chairwoman Waters] anticipated,” a financial services lobbyist familiar with internal discussions told American Banker. The lobbyist also noted that “The bill would prohibit loan terms that appear very reasonable to most people, such as a $250 loan repayable in a month with $10 of interest.”
While the Garcia-Grothman bill would ban loans with annual interest rates above 36 percent, others in Congress want to go even further. Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Bernie Sanders (I-Vt.) have introduced one such proposal, which would cap credit card interest rates at 15 percent.
“Chairwoman Waters has a difficult task on her hand,” the lobbyist said. “On the one hand, Rep. Ocasio-Cortez has a bill establishing a 15 percent rate cap. On the other hand, she has many members with significant nonprime populations in their districts who are genuinely concerned about access to credit.”