New Jersey Citizen Action Joins Broad Coalition Supporting Federal Bill to Cap Interest Rates
NEWARK: New Jersey Citizen Action joined more than 170 civil rights, consumer, labor, faith, and community organizations in calling on Congress to pass the Predatory Lending Elimination Act (S. 3793), stressing that triple-digit interest rates are draining wealth from working families and pushing borrowers into devastating cycles of debt. The bill, introduced by U.S. Senator Jack Reed (D-R.I.), would establish a nationwide 36% annual percentage rate (APR) cap on consumer loans, extending to all Americans the same protections currently guaranteed to military service members while preserving New Jersey’s strong state limits.
New Jersey Citizen Action Financial Justice Program Director Beverly Brown Ruggia said the legislation is long overdue. “A national standard is the simplest and most effective way to stop predatory practices while allowing states to go further. Therefore, a national 36% interest rate cap would finally end the most abusive lending practices, including payday loans that routinely carry staggering 391 to 400 percent APRs.”
“Just as importantly, this proposal would reinforce, not undermine, New Jersey’s leadership in protecting borrowers. The bill would establish a strong federal standard without weakening New Jersey’s 30% rate cap, ensuring our state’s long-standing protections remain intact and our residents are shielded from exorbitant predatory lending.”
The Predatory Lending Elimination Act covers all types of lenders, including banks, and would eliminate predatory payday loans, auto-title loans, and similarly harmful, high-cost credit across the nation by:
- Closing loopholes and preventing hidden junk fees.
- Simplifying compliance by adopting a standard that lenders already understand and use: the rate cap for service members that was established by the Military Lending Act, a bipartisan law enacted in 2006.
- Stopping lenders from using “rent-a-bank” schemes to charge triple-digit APRs.
- Establishing a simple, common-sense limit that has broad, bipartisan support from the public.
- Upholding the ability of states to adopt stronger protections as needed, such as lower rates for larger loans.
“This legislation is about fairness, economic stability, and ending debt traps that harm families and our broader economy. It is also about the affordability agenda, which must protect New Jerseyans from high-cost loans marketed as short-term financial ‘relief’ but are nothing more than debt traps that lead to financial ruin,” Brown Ruggia said.
The Predatory Lending Elimination Act does not apply to residential mortgages, car purchase loans, or loans by federal credit unions. Federal credit unions are already subject to an 18% interest rate cap for most loans and a 28% cap for payday alternative loans.
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New Jersey Citizen Action is a statewide advocacy and empowerment organization that advances social, racial and economic justice for all, while also meeting the pressing needs of low- and moderate-income New Jerseyans through education and direct services.
