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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.
Notably, the bill preserves state authority to enact stronger consumer protections, including lower rate caps on larger loans.
The measure does not apply to residential mortgages, car purchase loans, or loans made by federal credit unions, which are already subject to an 18% cap on most loans and a 28% cap on payday alternative loan products.
A coalition of more than 170 organizations — spanning civil rights, consumer protection, faith, and labor groups — sent a letter to the Senate Banking Committee Thursday urging passage of the bill.
Supporters point to a track record of public approval for rate caps at the state level. In Nebraska, a ballot measure establishing a 36% cap passed with support from roughly 80% of voters, illustrating what advocates describe as strong bipartisan backing from the public, even when legislative momentum has stalled in Washington.
Interest rate limits, historically known as usury laws, have been used by governments for thousands of years. Currently, nearly every state and the District of Columbia cap rates on at least some consumer installment loans, and 21 states plus D.C. ban high-cost short-term payday lending outright.
CRL has released a series of reports in recent years documenting the consequences of high-cost lending. A 2025 study found that payday lenders collected $2.4 billion in fees from borrowers in a single year. A 2026 report examined how one lender used a bank partnership to trap borrowers in unaffordable debt by evading state usury laws. Another 2026 study found that after Minnesota ended payday lending, borrowers experienced meaningful financial relief.
Whether the Reed bill advances through the Republican-controlled Senate remains to be seen. Previous efforts to establish a federal rate cap have cleared the House but stalled in the Senate, and the financial services industry has consistently lobbied against such restrictions, arguing they could reduce credit access for underserved borrowers.
