Joint Trades to Banking Panel Leaders: 36% Rate Cap Harms Credit Access, Consumers

Re: Financial trade associations’ views of fee and interest rate cap legislation 

Dear Chairman Brown and Ranking Member Toomey:

A proposed 36% interest rate cap on consumer loans, as defined under the Military Lending Act, would prevent banks from offering responsible, transparent small-dollar loans to help consumers cover unexpected expenses – therefore harming the consumers the legislation seeks to protect, BPI and several financial trades wrote in a letter to Senate Banking Committee Chairman Sherrod Brown (D-OH) and Ranking Member Pat Toomey (R-PA) opposing a rate cap bill. The cap would preclude banks from breaking even on short-term, small-dollar loans and limit choices in the marketplace, particularly for underserved consumers with less-than-pristine credit histories. The proposal in question also uses flawed mathematical calculations that overstate the cost of credit. The joint trades urge the lawmakers to reject the legislation, which would reduce access to credit, including safe bank products with affordable terms and transparent, consumer-friendly features, for underserved consumers.

Download the full letter below.