WASHINGTON, D.C. – Today, the U.S. House of Representatives voted to pass H.R. 3299, the so called “Madden fix” bill which would preempt state interest rate caps and open the flood gates to online predatory lending of 300% APR and higher loans. The bill passed despite not having support from consumer advocates. Several Members of Congress took to the floor to voice their firm opposition of this legislation and urged its sponsors to address predatory loopholes that exist in the bill. H.R. 3299 is sponsored by U.S. Reps. Patrick McHenry (R-N.C.) and Greg Meeks (D-N.Y.). The bill will now go to the Senate for consideration. A Senate companion bill, S. 1642, was introduced by U.S. Senator Mark Warner (D-Va.).
If passed into law, predatory “fintech” lenders will capture more vulnerable borrowers in a debt trap, which already drains more than $8 billion a year from the working poor. Center for Responsible Lending Director of Federal Advocacy Scott Astrada released the following statement:
The claim that this bill will help underserved urban and rural areas by expanding access to credit is false. The reality is that it will expand unchecked predatory lending and allow lenders to make high-cost loans, such as short-term and long-term payday loans and car title loans, at rates that exceed existing state interest rate limits.
Rent-a-bank schemes like this will only enable predatory loan laundering and wipe out the $2.2 billion in annual savings in states that prohibit triple-digit APR interest rates. (PDF) This legislation would spring a debt trap for millions more low-income Americans across the country. Research has consistently shown that payday or car title loans make borrowers more likely to enter a cycle of debt (PDF), lose their bank accounts, lose their cars, and to go bankrupt.
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