This week Senator Richard Durbin (D-IL) introduced a federal usury bill, S.2387, the Protecting Consumers from Unreasonable Credit Rates Act. I haven’t found a copy of the bill yet, but according to Durbin’s website, the the bill:
• Establishes a maximum interest rate of 36% on all consumer credit transactions, taking into account all interest, fees, defaults, and other finance charges.
• Clarifies that this cap does not preempt any stricter state laws.
• Applies civil penalties for violations including nullification of excess charges, fines, and prison.
• Empowers attorneys general to take action for up to three years after a violation.
There are four major points to make about this legislation. First, it would restore an important element of democratic political accountability to consumer protection in financial services. Second, it would significantly restore states ability to protect their own citizens. Third, it offers a solution to the problems of financial products being structured so as to avoid APR disclosures and to catch consumers with hidden fees. And fourth, it represents a very important first step in a legislative process of rethinking the model of credit industry regulation.
[Hat tip to Dan Ray for the link to the text.]