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Sen. Jack Reed
Sen. Jack Reed (D-R.I.) introduced the Predatory Lending Elimination Act (S. 3793), which would apply the rate ceiling — inclusive of fees — across credit cards, installment loans, car-title loans, and payday loans. The bill would cover all lenders, including banks.
The Center for Responsible Lending, a nonprofit advocacy organization, applauded the legislation Thursday, calling it a necessary shield against what it described as lenders exploiting financially vulnerable families.
"This legislation would stop predatory lenders from fleecing families who are already overburdened by the high cost of essentials like food and housing," said Nadine Chabrier, CRL's senior policy counsel. "The Predatory Lending Elimination Act would prevent lenders from charging extremely high prices through hidden junk fees or evasion of state laws."
The bill arrives as policymakers and consumer advocates have intensified scrutiny of high-cost lending, particularly as inflation has strained household budgets. Payday loans and similar short-term credit products frequently carry triple-digit APRs, trapping borrowers in cycles of debt that are difficult to escape.
The legislation is modeled on the Military Lending Act, a bipartisan law enacted in 2006 that caps interest rates on loans to servicemembers at 36% APR. Reed's bill would nationalize that standard.
Beyond setting the rate ceiling, the bill targets several mechanisms lenders use to circumvent existing state protections. It would close what critics call "rent-a-bank" loopholes, schemes in which nonbank lenders partner with federally chartered banks to export higher interest rates into states with stricter usury laws. The legislation would also bar lenders from concealing costs through junk fees that effectively inflate the cost of borrowing above stated rates.
