The Consumer Bankers Association (CBA) will continue to oppose proposed legislation imposing a cap on interest rates, which it maintains would limit consumers’ credit access.
The CBA has indicated that the recently re-introduced measure by the House of Representatives would negatively impact low- and moderate-income communities.
Per the CBA, interest rate caps do not address the demand for credit in the form of small-dollar and short-term loans – but do reduce the supply of those loans.
“For millions of American families, small dollar loans, credit cards, and other innovative products provided by banks provide affordable credit options they rely on to meet their financial needs, including covering emergency expenses,” CBA President and CEO Richard Hunt said via a statement regarding the issue. “Imposing arbitrary, one-size-fits-all caps on fees and interest rates will do nothing but limit consumer choice and competition, instead driving borrowers toward predatory lenders outside of the well-regulated, well-supervised banking industry. Simply put, a 36 percent rate cap, however calculated, will harm the very people we are all working to protect.”
The CBA noted the organization has urged legislators to extensively study any proposed nationwide binding interest rate cap before being considered by Congress.
Before the July Senate Banking Committee Hearing, the CBA and other trade organizations forward correspondence sent to Senate Banking Committee Chairman Sen. Sherrod Brown (D-OH) and Ranking Member Sen. Pat Toomey (R-PA).
“Many consumers who currently rely on credit cards or personal loans would be forced to turn elsewhere for short-term financing needs, including pawn shops, online lenders—or worse—loan sharks, unregulated online lenders, and the black market,” the organizations wrote.