On Interest Rate Caps, Special Interest Group Deceives Consumers

The deceptively named Center for Responsible Lending is misleading Americans in a recent one-pager about interest rate caps. While the organization paints rate caps in a positive light, it is obvious that capping rates actually harms American consumers and puts financially vulnerable people in peril.

The Center for Responsible Lending claims capping short-term loans, such as payday loans, will prevent consumers from becoming overly indebted. That could not be more wrong. Capping interest on short-term credit options forces financial institutions to be more selective in issuing loans. This means Americans who are disadvantaged, have a poor credit history, and lack access to bank accounts will be restricted from receiving the credit they need. We have already seen the consequences of these rate caps in states that have imposed them.

Let’s say people in need of small-dollar credit don’t want to take out a larger, long-term loan. Then what happens? People in difficult financial situations turn to even more undesirable alternatives like bankruptcy, bouncing checks, amassing credit card debt and paying only the monthly minimum, selling their possessions, or worse. Restricting access to credit will not prevent financial struggles, it will lead only to more challenges and hardships in America.

It is suspicious that in this piece, the Center for Responsible Lending cites mainly its own prior publications, neglecting any reliable, disinterested, or counterbalancing third-party sources. It is clear that the Center for Responsible Lending has no idea what is best for American consumers. The organization is blinded by its misguided agenda and fails to provide reliable, legitimate consumer credit information.

The Domestic Policy Caucus encourages everyone to learn more about the reality of short-term loans, and the benefit they convey to consumers by visiting the following websites: Online Lenders Alliance, Corporate Finance Institute, Boss Magazine.