Special interest groups are pressuring Congress to use the Coronavirus Stimulus Phase III bill as a vehicle for imposing a nationwide interest rate cap on short-term loans. Competitive Enterprise Institute financial policy experts vehemently oppose that effort, warning that it would shut off access to credit for countless consumers at a time when they might need it most.
Statement by CEI Senior Fellow John Berlau:
“For Congress to impose a national 36 percent interest rate cap on lenders is harmful to low-income borrowers at all times but especially during a national crisis when we need to keep all credit options open to consumers and families.”
“A 36 percent annual rate cap translates into a cap of only $1.38 in interest for a $100 loan of two weeks, the duration period of many short-term loans. This amounts to a rate at which small dollar lenders could not even cover payroll, let alone make a profit.”
Statement by Policy Analyst Matthew Adams:
“A government-imposed interest rate cap would cripple consumer lending and further hurt already struggling Americans. Instead, lawmakers should look at deregulatory actions that would get rid of barriers that stand in the way of consumers and their ability to get access to much-needed, affordable credit.”