CBA Opposes Legislation Threatening Access To Credit For American Families


WASHINGTON – Consumer Bankers Association President and CEO Richard Hunt today released the following statement in opposition to legislation re-introduced by U.S. Senators Jack Reed (D-RI), Jeff Merkley (D-OR), Sherrod Brown (D-OH), and Chris Van Hollen (D-MD) which would limit consumers’ access to credit by imposing an arbitrary 36% rate cap on consumer loans:

“As the nation grapples with the economic effects of a global pandemic, families must have access to affordable credit to meet their emergency expenses. Small dollar loans, credit cards, and other forms of short-term credit are valued products for many consumers who depend on them to put food on the table, pay a bill, or travel to work. Make no mistake, a 36% rate cap on consumer loans would limit consumers access to safe and affordable bank products, harming low-and-moderate income communities most. Reducing access to these emergency safety nets will force consumers to turn to less-regulated payday lenders, loan sharks or the black market. CBA looks forward to working with legislators on research-based proposals that will advance our shared goal of expanding access to credit for all Americans.”

Earlier today, Consumer Bankers Association General Counsel and Senior Vice President, David Pommerehn testified before the U.S. Senate Banking Committee on the impact new caps on interest rates would have on consumers’ access to credit. Commenting on their effect on banks’ ability to provide access to safe and affordable loan products for consumers, he said:

“A fundamental aspect of lending and a cornerstone to prudent banking practices is a bank’s ability to accurately price risk. Expanding rate caps to all consumers and many important loan products will ultimately disrupt banks’ ability to appropriately price risk, increase the cost of credit, and limit its availability. Borrowers with troubled credit histories will be most affected by any limitation on banks’ ability to price risk, reducing the amount of available loan offerings that are tailored to meet their financial needs.”

Recognizing the impact a 36% rate cap would have on the small-dollar lending market, Pommerehn stated:

“Mandating a maximum annualized rate of 36% would effectively eliminate small-dollar loans as a credit option for millions of financially vulnerable Americans pushing them out of the well-regulated, well-supervised depository industry and into inferior alternatives. […] A reality many Americans and their families will face upon losing access to short-term credit will be the inability to meet an emergency financial need and incur more financial harm through unpaid bills, negative hits to credit histories, lost opportunities and more.”

Pommerehn later commented on the negative implications of a one-size-fits-all rate cap on the credit card market, which would leave consumers with fewer choices:

“The consumer credit card market today offers a wide variety of products designed to meet the needs of different consumers at a variety of price points. Many customers choose cards with annual membership fees because such products offer non-credit related features such as reward programs, travel and dining benefits, and insurance. Extending an all-in cap to all consumer loans will reduce the availability of these popular credit card rewards and benefits.”

To read Pommerehn’s full written testimony submitted to the Senate Banking Committee, click HERE.

To read Pommerehn’s remarks delivered before today’s hearing, click HERE.

To learn more about the negative consequences of extending the military’s 36% interest rate cap to all consumers, click HERE.

To read the letter CBA and other trades sent last week to U.S. Senate Banking Committee Chairman Sherrod Brown and Ranking Member Pat Toomey, urging Congress to oppose any fee and interest rate cap legislation, click HERE.