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Congressman Matt Cartwright

Representing the 8th District of Pennsylvania


Cartwright & Cohen Introduce Legislation to Cap Excessive Interest & Fees on all Consumer Credit Products

Jul 17, 2014
Press Release

Washington – Today, U.S. Rep. Matt Cartwright (D-PA-17) and Steve Cohen (D-TN-9) introduced the Protecting Consumers from Unreasonable Credit Rates Act, legislation that would enact a cap on reform fees and rates associated with consumer credit products, including short-term and long-term payday loans and car title loans.  U.S. Senate Assistant Majority Leader Dick Durbin (D-IL) and Senators Barbara Boxer (D-CA), Richard Blumenthal (D-CT), Jeff Merkley (D-OR), and Sheldon Whitehouse (D-RI) introduced the legislation in the Senate.

Predatory lending – defined by the Federal Deposit Insurance Corporation as the practice of “imposing unfair and abusive loan terms on borrowers” – extracts approximately $27 billion in excessive fees and interest from 12 million Americans each year due to excessive rates which can top 300 percent, according to the Center for Responsible Lending.  Pennsylvania prohibits payday loan storefronts and is one of the few states to prohibit excessive rates.  The state Supreme Court upheld this cap in 2010, though there have been recent efforts by certain state legislators and the payday loan industry to weaken the state law.

“Pennsylvania recognizes that predatory lending disproportionately harms economically disadvantaged individuals – people who are already struggling financially,” said Rep. Cartwright.  “My consumer-friendly legislation would provide relief from exorbitant fees for many low-income consumers across the country.  Capping interest rates and fees for all consumers will not only protect working families but also enable our economic recovery.”

In 2006, Congress enacted a federal 36 percent annualized usury cap for certain credit products marketed to servicemembers and their families.  This bill would extend that maximum cap of 36 percent to all consumer credit transactions for all consumers.  The federal cap would not preempt stricter state laws. The bill would also encourage the creation of responsible alternatives to small dollar lending, by allowing initial application fees and for ongoing lender costs such as insufficient funds fees and late fees.  To ensure compliance with the cap, the bill would create specific penalties for violations and supports enforcement in civil courts and by State Attorneys General.

“Throughout my career, I have worked to shield people from those who would take advantage of them through predatory lending practices. Predatory lenders wreck people’s lives and perpetuate a cycle of indebtedness. Justice and morality dictates that reasonable caps on interest be enacted to protect borrowers from devious lenders,” said Rep. Cohen.

“As we continue moving toward economic recovery, too many of America’s working families continue to struggle.  For some, payday lenders offer a quick way to make ends meet, but often with devastating consequences.  With interest rates of two and three hundred percent of value of the loan, these excessive rates and hidden fees have crippling effects on those who can afford it least.  I am glad to be joined today by Representatives Cartwright and Cohen in taking action to help protect working families from these predatory lending practices,” said Senator Durbin.

38 organizations have endorsed the legislation including the Alabama Appleseed Center for Law and Justice, Alabama Arise, Americans for Financial Reform, Arkansans Against Abusive Payday Lending, Baltimore Jewish Council, California Reinvestment Coalition, Center for Economic Integrity, Center for Economic Justice, Center for Responsible Lending, Coalition of Religious Communities, Connecticut Association for Human Services, Consumer Action, Consumer Assistance, Council of Cape Cod and the Islands, Consumer Federation of America, Consumer Federation of California, Consumers Union, Demos, Georgia Watch, GRO Missouri, Jesuit Social Research Institute at Loyola University, Kentucky Equal Justice Center, Maryland Cash Campaign, Maryland Consumer Rights Coalition, Miami Valley Fair Housing Center, Inc., NAACP, National Consumer Law Center (on behalf of its low income clients), National Fair Housing Alliance, National Health Law Program, New Economy Project, North Carolina Consumers Council, Public Citizen, Public Justice Center, Reinvestment Partners, South Carolina Appleseed Legal Justice Center, Southwest Center for Economic Integrity, Virginia Citizens Consumer Council, Woodstock Institute