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Senator Durbin Proposes S. 500 to Reinstate Usury Laws

March 2, 2009

This week Senator Durbin (D, IL) introduced S. 500 which would limit interest rates to 36%.  Rep. Jackie Speier (D, CA 12) is expected to introduce companion legislation in the House of Representatives.  AFFIL and other groups submitted this letter (PDF) in support of the bill:

The “Protecting Consumers from Unreasonable Credit Rates Act” would
implement a key promise made by President Obama to extend to all Americans Congressional protection against predatory lending for Service members and their families. By limiting the total cost of consumer credit to 36 percent, Congress will keep billions of dollars in the hands of low and moderate-income consumers, helping to stimulate the economy without costing taxpayers a penny.

As PIRG’s Ed Mierzwinski points out in this post, usury caps have been in place throughout Western history, including in the United States, until about 30 years ago when wrong-headed court and Congressional actions did away with them.  S. 500 would apply “not just to predatory payday lenders, rent to own stores and their ilk. The limit would apply to credit cards and shameful bounce-overdraft protection loans made by banks. While 36% APR may sound higher than most credit card rates, the bill limits would apply to their punitive fees as well, which have the effect of triple-digit interest.”

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