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