Tag: usury

  • Where’s the Beef? Elizabeth Warren Edition

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    Adam Levitin

    Here's what's striking about all the criticism of Elizabeth Warren: there's no smoking gun. No one has been able to point to anything radical in Elizabeth Warren's extensive body of writing. Where's the beef?

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  • Usury and Securitization

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    Adam Levitin

    Most institutional lenders in the United States are not subject to usury laws.  National banks can evade they by basing themselves in states without usury laws and exporting the laxer regulation to other jurisdictions.  State institutions often find themselves exempt because of state banking parity laws.  And usury laws are preempted for many mortgages by federal law (although originally the FHA eligibility rate cap–removed in 1983–served as a de facto federal usury law for many mortgages). 

    There's plenty to say (at another date) about whether usury laws are good policy.  I want to raise a related legal question for discussion on the Slips:  are debts held in securitized pools subject to usury laws? 

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  • Usury Bill

    Posted by

    Adam Levitin

    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.]

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