Durbin Introduces Bill to Crack Down on Excessive Interest Rates and Fees

Legislation Would Cap Interest Rates and Fees for All Consumer Credit Transactions

[WASHINGTON, D.C.] –U.S. Senator Dick Durbin (D-IL) introduced the Protecting Consumers from Unreasonable Credit Rates Act today - a bill to eliminate the excessive rates and fees that some consumers are charged for payday loans, car title loans and other types of credit.

“Within blocks of my home in Springfield, Illinois, there are payday lenders charging interest rates of two and three hundred percent of the value of the loan,” Durbin said. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least. Congress must enact protections against predatory lending. America’s working families depend on it.”

Durbin’s bill would establish a new Fee and Interest Rate (FAIR) calculation that includes all interest and fees and creates a cap of 36% for all consumer credit transactions. That rate is similar to usury caps already enacted in many states and is the same as the cap already in place for military personnel and their families.


Efforts to address the exorbitant interest rates charged on many payday loans have often failed because of the difficulty in defining predatory lending. Durbin’s bill seeks to overcome this problem by setting a relatively high interest rate as the cap and applying that cap to all credit transactions.


To protect consumers from predatory lending practices and to help consumers use credit more wisely, the Protecting Consumers from Unreasonable Credit Rates Act as introduced by Senator Durbin bill would:


• Establish a new Fee And Interest Rate (FAIR) that incorporates all interest, fees, finance charges, and related costs of credit.


• Institute a federal maximum annualized FAIR limit equal to 36% and apply this cap to all open-end and closed-end consumer credit transactions, including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans, and payday loans.


• Encourage the creation of responsible alternatives to small dollar lending, by providing tolerances for initial application fees and for ongoing lender costs such as insufficient funds fees and late fees.


• Ensure that this federal law does not preempt stricter state laws.


• Create specific penalties for violations of the new cap and support enforcement in civil courts and by State Attorneys General.


The bill is supported by 100 national and state groups, including the Consumer Federation of American, the National Consumer Law Center, the Center for Responsible Lending, USPIRG, and Consumers Union. A federal usury cap is good policy to combat the immediate crisis and it is good policy to prevent the next crisis. Now is the time for Congress to act.