Ahead of a Senate Hearing He Will Hold Tomorrow, Brown Promotes the ‘Veterans and Consumers Fair Credit Act’ to Expand the Military’s Predatory Lending Protections to Everyone, Cap APR Interest Rates at 36 Percent
WASHINGTON, DC – U.S. Senator Sherrod Brown (D-OH) today hosted a news conference call to promote the passage of his bipartisan Veterans and Consumers Fair Credit Act, which will be reintroduced today, and would protect people from predatory payday and car title loans. Brown hosted the call ahead of a hearing he will hold on this important legislation tomorrow morning, as the chairman of the Banking, Housing and Urban Affairs Committee.
“Payday, car title, and other shady lenders target Ohio’s military families, veterans, and vulnerable consumers with high-interest, predatory loans designed to trap them in a cycle of debt. Many Americans have to renew their loans so many times, they end up paying more in fees than the amount they borrowed,” said Brown. “We can put an end to these abusive debt traps by extending the Military Lending Act’s 36 percent cap on interest rates to everyone.”
Brown was joined on the call by Gloria Olivencia, a Lorain resident who took out a payday loan for a few hundred dollars several years ago. It ended up taking her more than a year, a second job, and more than a thousand dollars in interest and fees to free herself from what she calls the “ruthless cycle” of payday loans.
“It’s so easy to just get a payday loan, but then when you can’t pay it back it ruins your credit, it makes you frustrated it makes you live really week by week,” said Olivencia. “For an entire year I would have to give the lender my whole paycheck, and I had to take on more and more loans. I was so frustrated I didn’t know where to go or who to help me and legislation like this might help others who feel hopeless in the cycle of debt.”
Payday loans are short-term loans, usually for $500 or less, with interest rates as high as 600 percent. Car-title loans similarly offer short-term, high interest cash loans using a car’s title as collateral. According to a study by the Pew Charitable Trusts, as many as 12 million Americans use payday loans each year, most borrowing for routine expenses, with borrowers spending as much as $9 billion each year on payday loan fees.
Brown’s bill would build on the 2006 Military Lending Act and extend to veterans and all Americans the protections active duty military, their spouses and dependents currently receive.
Among other things, the Veterans and Consumers Fair Credit Act would cap the Annual Percentage Rate (APR) on loans at 36 percent, compared to rates that frequently top 600 percent in some states.