Impact of interest rate cap? That depends on who you ask

by David Baumann, Washington CU Daily

National Credit Union Administration Chairman Todd Harper says a 36% interest rate cap on consumer loans would have no impact on credit unions. Credit Union trade groups say the cap would force credit union members to take out larger, longer-term loans. The CEO of the Essential Credit Union says that a 36% cap is fine with him. Confused? Who wouldn’t be?

So far, 18 states and the District of Columbia have enacted interest rate caps that are designed to crack down on predatory lending.

Now senators, including Senate Banking Chairman Sherrod Brown, D-Ohio, and Senate Armed Services Chairman Sen. Jack Reed, D-R.I., have reintroduced legislation that would cap interest rates at 36%, the same level as the Military Lending Act.

“There is no reason consumers should be charged a 300% [annual percentage rate] to access credit,” Reed said.

 

continue reading »