By Brando Sencion, Program Coordinator
Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez proposed a cap on interest rates for credit cards and other consumer loans at an annual rate of 15 percent, to help consumers facing growing credit card debt.
The bill would place restrictions on short-term loans, such as payday loans, which rely on significantly higher interest rates. In California, a payday loan can have an interest rate of about 460 percent for two-week loan. Small loan lenders say they want to help consumers access loans, they otherwise wouldn’t be able to with traditional lenders. But the opposition believes they are profiting on billions of dollars in interest and fees from low-income consumers.
The bill would be a win for consumers by limiting the interest rates banks place on loans and credit cards. Being poor in the United States can comes at a price. Not only do low-income families not qualify for traditional ban products due to income, credit history and other factors, but they are forced to turn to alternative lending services. Predatory lenders are well aware of their consumers and operate their businesses in low-income communities of color. In Santa Cruz County, there are 3 times more predatory lending services in Watsonville, compared to Santa Cruz.
The bill aims to protect consumers from big banks and predatory lenders. Services such as payday loans and other alternative lending products do not have the consumers well-being in mind. They charge high interest rates, impose obscure loan conditions, and lack consideration for the borrower's ability to pay back the loan. Capping the annual interest rate would protect consumers from predatory practices and give access to all for better lending and credit card products.
Article: Sanders, Ocasio-Cortez Propose 15% Cap on Credit Card Interest