WASHINGTON (NEXSTAR) – Congress is working to lower interest rates on consumer loans – including short-term payday loans.
Lawmakers have a plan to cap rates at 36% for all Americans. But financial groups say it will hurt the exact people Congress is trying to protect.
Senator Jeff Merkley (D-OR) wants to cap what he calls “exorbitant” interest rates on consumer loans.
“It’s kicking people when they’re down,” he said. “It is financially destroying families and we shouldn’t let this happen. “
Merkley says some short-term loans charge huge interest rates on people who can least afford them.
“Three hundred percent, 400 percent, even 500 percent, which just sucks people into a debt vortex from which they cannot escape,” said Senator Merkley.
Federal law protects active duty members from high interest loans, capping interest rates at 36%. Senator Merkley wants to extend this protection to all Americans with his “Fair Credit Act for Veterans and Consumers”.
Merkley says the bill will help families at the limit, but a financial group says it will do the exact opposite.
“What they’ve done is basically hurt the people they claim to want to help,” said Bill Himler, president of the American Financial Services Association.
Himler says interest rates have to be higher for small dollar loans, or lenders won’t lend.
“Someone who needs to fix some tires on their car or truck couldn’t get it without taking out a loan four times the size they need,” he said.
Himler says he’s trying to educate people – and members of Congress – on the issue and is working to find common ground.
Merkley and a group of bipartisan lawmakers plan to renew their push for the bill in the New Year.