Battle Lines Form Over Rate-Cap Legislation

American Banker
June 1, 2009
Kaper, Stacy
P. 1

The credit card, auto, and payday lending industries would be impacted by a bill to be considered by the Senate Judiciary Committee after Congress' recess. The legislation by Sen. Sheldon Whitehouse (D-R.I.) aims to prevent the issuance of high-cost loans and would make it easier for consumers to discharge debts in bankruptcy. When calculating annual percentage rates, fees would be factored in. Additionally, the bill defines "high cost" as 36 percent or 15 percent plus the 30-year Treasury yield, whichever is less. Furthermore, consumers with high-cost debt would be allowed to file for Chapter 7 bankruptcy without passing the means test. "I really think this legislation speaks to the higher level of scrutiny that is going to occur with regard to high-cost lending in the Senate," says National Community Reinvestment Coalition executive vice president David Berenbaum. "There is going to be a lot more attention on the quality of underwriting of loans regardless if it's residential or a consumer loan."