A longtime champion of bankruptcy reform, Illinois Senator Richard Durbin has proposed a new bill that would create a national interest rate cap on consumer credit.
Durbin's plan would eliminate the shockingly high interest rates that some consumers find themselves being forced to pay for consumer loans like payday loans, which can come with interest rates in excess of 300% in extreme cases!
Currently, the cap for such loans on military personnel and their families is at 36%—the bill would simply apply this cap to all consumers.
While it is not certain that Durbin will be able to drum up support for this legislation—a Durbin proposal to allow judges to rework the terms of mortgage loans in bankruptcy proceedings failed recently—his latest offering shows that some lawmakers are beginning to take the economic downturn seriously and find ways to make life easier for consumers during this time.
Tags: bankruptcy, bankruptcy reform, loans, payday loans
This entry was posted on Monday, July 28th, 2008 at 5:01 pm and is filed under Credit and Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
What is the status of Senator Durbin’s consumer interest rate cap proposal and what level of support is it receiving?
thanks
I understand that the Payday loan interest in extremely high but why are collaretal loans mentioned in this s.500 bill.Pawnshops are consumers last hope in receiving loans that will carry them foward through the next pay period.Pawnshops will not be able to stay open and continue helping the unfortunate cunsumers who can not walk into a bank and obtain a signature loan much less walk into a Payday Loan comoany and never see their next check due to paying 300% or more on interest.Pawn loans are used for consumers who have already purchased an item and use that material as collateral to make it until the next pay period.
Anyone who has had any contact with Payday Loans realizes that those interest rates are destructive and cause a high percentage of those loans to fail. Pawn loans are a completely different kind of transaction and allow consumers with short term needs to borrow using things they own as collateral. Most pawn shop customers are unable to qualify for bank or even finance company loans. The pawn industry serves as vital need for many people, lowering the rate to 36% would cause those sources of credit to disappear, cutting off loans to people who need them and putting everyone in the industry out of work. The fact is that pawn shops making loans to the military must have a lot of non-military customers paying normal rates or they would be forced to go out of business. The effect of legislation that is supposed to help consumers would cut off one of the only available sources of short-term cash for those consumers.