“A bill to amend the Truth in Lending Act to establish a national usury rate for consumer credit transactions.”
No CRS summary available for this bill.
This section states congressional findings on usurious interest rates and predatory lending, including that attempts to prohibit such rates date to colonial times; a federal 36% annualized cap was enacted in 2006 for servicemembers and their families on covered credit products; high-cost lending persists nationwide due to state law loopholes; consumers have paid approximately $12 billion on high-cost overdraft loans, $8.6 billion on payday loans, and $3.8 billion on car title loans at average annualized rates of 17,000%, 400%, and 300%, respectively, plus triple-digit rates on online installment loans; and a national maximum interest rate including all fees is necessary, with encouragement for affordable small-dollar loan alternatives.
This section establishes a maximum fee and interest rate of 36% for any extension of consumer credit under the Truth in Lending Act (TILA). The fee and interest rate encompasses all charges payable directly or indirectly incident to the extension of credit—including finance charges, late or insufficient funds fees, credit insurance premiums, and fees for ancillary products such as paycheck advances repaid automatically at the end of a pay cycle—with tolerances excluding (for credit payable in at least three fully amortizing installments over 90 days) application or participation fees up to the greater of $30 or 5% of the credit limit (to $120), late fees up to $8 per payment or month, and insufficient funds fees up to $15 (amounts adjustable by the Bureau of Consumer Financial Protection (CFPB) for inflation). The fee and interest rate is calculated for open-end credit as the prior year's qualifying fees and charges divided by average daily balance (or pro-rated for newer accounts) and, for other credit, using TILA's section 107(a)(1) annual percentage rate methodology expanded to include all qualifying fees (with CFPB authorized to adjust methods to prevent circumvention). The provision adopts the Equal Credit Opportunity Act's definition of creditor; bars CFPB exemptions under TILA section 105; authorizes additional disclosures and preserves stronger state laws; and provides robust enforcement, rendering violating payments null and void with indefinite recoupment rights as a defense to collection actions.
This section revises the disclosures required on each periodic billing statement for open-end consumer credit plans (i.e., credit cards and similar accounts) by replacing the requirement to disclose the total finance charge (and related details) with a requirement to disclose the fee and interest rate, displayed as “FAIR”, as established under section 141.