Van Hollen and colleagues seek to cap consumer loans at 36%

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July 29, 2021

WASHINGTON – In an effort to end abusive and predatory lending practices that target vulnerable consumers, U.S. Senators Chris Van Hollen (D-MD), Jack Reed (D-RI), Jeff Merkley (D-OR) and Sherrod Brown (D-OH), led the reintroduction of legislation that would extend the protections of the Military Loans Act (MLA), which caps the annual percentage rate (APR) on consumer loans at 36%, to cover veterans and other consumers.

In 2006, Congress passed the MLA to curb predatory payday lenders and other loan product providers who used abusive lending practices to target and lure US troops into debt traps. However, the legislation has left veterans, Gold Star families and other Americans vulnerable to these loan practices and products.

To date, 18 states and the District of Columbia have adopted interest rate caps that prevent payday loans. But senators say federal action is needed to protect consumers nationwide from financial harm from high-cost and abusive loan products.

In addition to Senators Van Hollen, Reed, Merkley and Brown, the bill is also co-sponsored by U.S. Senators Tina Smith (D-MN), Cory Booker (D-NJ), Richard Blumenthal (D-CT), Brian Schatz (D-HI), Dianne Feinstein (D-CA), Raphael Warnock (D-GA), Patrick Leahy (D-VT) and Ron Wyden (D-WA).

“Far too many Americans are having their hard-earned money cheated by predatory payday lenders who prey on our country’s consumers, including the men and women who have fought so hard and sacrificed so much for our country. This bill will help prevent these practices and protect our veterans and other consumers by building on the success of the military loans act. I urge the Senate to move forward immediately on this common sense bill,” said Senator Van Hollen.

“The Military Loans Act was a bipartisan success, and predatory lenders should not be given more targets just because military members and their families retire, part ways with honorable service, or lose loved ones.” , said Senator Reed. “The Veterans and Consumers Fair Credit Act not only restores these Military Lending Act protections for veterans and Gold Star families, but also ensures that all Americans are protected from financial abuse. There’s no reason consumers have to pay a 300% APR to access credit. These types of predatory lending trap individuals in cycles of debt, adding crippling financial burdens to the backs of those who can least afford it. Our bill would ensure that consumers are treated fairly and prevent people from being overburdened by shady lending practices.

“Predatory payday practices that lure military members, veterans, Gold Star families or anyone who works hard into debt vortexes through high interest loans are dangerous, unethical and should be illegal” , said Senator Merkley. “The passage of the Military Loans Act made a huge difference for active duty military personnel by prohibiting these subprime loans, and veterans and other consumers deserve the same protections. We cannot sit idly by for that abusive payday lenders continue to inflict financial ruin on American workers.

“Payday loans, car titles and other shady lending practices target military families, veterans and vulnerable Ohio consumers with predatory high-interest loans designed to trap them in a cycle of debt. Many Americans have to renew their loans so many times that they end up paying more in fees than the amount they borrowed,” said Senator Brown. “We can end these abusive debt traps by extending the law’s 36% interest rate cap on military loans to veterans, surviving family members and all consumers.”

Under the Fair Credit for Veterans and Consumers Act, the Military Loans Act’s 36% APR cap on most consumer loans and its current rules would be extended to all consumers, including veterans and Gold Star families. The Fair Credit for Veterans and Consumers Act also upholds the authority of the Consumer Financial Production Bureau (CFPB) to conduct supervisory reviews to ensure lenders meet the MLA’s 36% APR cap for military members. , veterans and all Americans. The CFPB, which ceased overseeing MLA compliance in 2018, recently announced that it is resuming these exams.

The legislation has been endorsed by a wide variety of consumer, civil rights, veterans, military organizations and advocates, including: Consumer Federation of America; Military Officers Association of America; National Association of Military Families; Successful education of veterans; Americans for Financial Reform; Center for Responsible Lending; consumer action; NAACP; National Consumer Law Center (on behalf of its low-income clients); and Hollister Petraeus and Col. Paul E. Kantwill, USA (Retired), former Deputy Directors, Consumer Financial Protection Bureau, Office of Servicemember Affairs.

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