Senate and House Legislation would end the payday lending debt trap

WASHINGTON, D.C. – Today, the Center for Responsible Lending (CRL), Americans for Financial Reform (AFR), and nearly 40 national and state organizations sent a letter urging Members of Congress to pass the Protecting Consumers from Unreasonable Credit Rates Act, a bicameral bill introduced by U.S. Senators Richard Durbin (D-Ill.) and Jeff Merkley (D-Ore.) and U.S. Representatives Matt Cartwright (D-Penn.) and Steve Cohen (D-Tenn.). The bill would protect consumers from predatory lenders by capping payday and car-title loans at no more than 36% annual percentage rate (APR).

"Currently, payday and car title lenders charge triple digit annual interest rates, often 300 percent or higher. A large body of research has demonstrated that these products are structured to create a long-term debt trap that drains consumers’ bank accounts and causes significant financial harm, including delinquency and default, overdraft and non-sufficient funds fees, increased difficulty paying mortgages, rent, and other bills, loss of checking accounts, and bankruptcy,” the group wrote. “It is vitally important for Congress to set the outside limit on the cost-of-credit to curb abusive lending. Today, 15 states plus D.C. enforce rate caps of about 36 percent or lower, reaching over 90 million Americans. In 2006, Congress, with the support of the U.S. Department of Defense, similarly enacted a 36 percent cap for loans to active duty military. Thus, we know from experience that a rate cap like that proposed by this bill is the most effective way to stop the harms of these abusive loans."

Consumer advocates across the country have worked tirelessly to push for stronger regulation at the federal and state level to rein in the payday lending debt trap. A poll released by CRL and Americans for Financial Reform shows that the public supports regulation of high-interest payday lending. The Protecting Consumers from Unreasonable Credit Rates Act is introduced as the Consumer Financial Protection Bureau (CFPB) finalizes its rule on payday and car-title lending, which is expected to be released later this month. Congress, unlike the CFPB, has authority to cap the rate of these high-cost loans.

Payday and car-title loans are small-dollar, high-cost products that thrive on keeping consumers in a cycle of debt. With lenders doing essentially no underwriting, payday and car title lenders ensnare people in long-term debt, often marketed as a solution to financial emergency. However, the unaffordability of the loan and the lenders extreme leverage over the borrowers – either through direct access to the bank account or threatening repossession of the borrower’s car – makes it very difficult to escape a cycle of debt that can last months, if not years.

View a copy of the group’s letter and list of organizations supporting the Protecting Consumers from Unreasonable Credit Rates Act.

CRL has documented the enormous harm predatory payday and car-title lending has on working families. CRL’s 2016 report found that payday and car title lenders drain $8 billion in fees every year from states that don’t ban the practices.

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For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at

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