Statement: Bipartisan introduction of Veterans and Consumers Fair Credit Act marks important step in stopping the debt trap

Media Contacts


Bill would cap interest rates nationwide on consumer loans at 36 percent

WASHINGTON — The Veterans and Consumers Fair Credit Act (VCFCA) was reintroduced in the House Committee on Financial Services earlier this week. This bill would limit interest rates on loans and go a long way toward protecting consumers, including veterans, who are often victimized by predatory lenders. 

High-cost lenders set up shop in high concentrations outside military bases like “bears on a trout stream,” according to experts. These lenders prey on young servicemembers who have low, but reliable, incomes. In 2006, Congress passed the Military Lending Act (MLA) to cap interest rates at 36 percent APR on predatory loans sold to active duty servicemembers. In 2015, the Department of Defense revised it to cover more products, such as credit cards. The VCFCA would extend MLA protections to all Americans. That 36 percent maximum interest rate would apply to many consumer loans, including payday and high-cost installment and auto title loans. 

Eighteen states and Washington, D.C., already have interest rate caps that discourage payday lenders from distributing short-term loans. In addition, 45 states and Washington, D.C., have capped interest rates on longer-term loans. However, each state sets its own rules for what is allowed. The VCFCA would standardize a 36 percent cap in all states, while allowing states to enact even more consumer-friendly upper limits.

The VCFCA is sponsored in the House by Reps. Jesus “Chuy” Garcia (D-IL) and Glenn Grothman (R-WI) and cosponsored by Reps. Earl Blumenauer (OR), Suzanne Bonamici (OR), André Carson (IN), Danny K. Davis (IL), Sylvia Garcia (TX), Sheila Jackson Lee (TX), Raja Krishnamoorthi (IL), Ted Lieu (CA), Alan Lowenthal (CA), Carolyn B. Maloney (NY), Eleanor Holmes Norton (DC), Donald M. Payne Jr. (NJ), Mark Pocan (WI), Rashida Tlaib (MI), and Bonnie Watson Coleman (NJ).

It was introduced in the Senate Committee on Banking, Housing, and Urban Affairs in July 2021. The Senate version is sponsored by Sen. Jack Reed (RI) and co-sponsored by Sen. Jeff Merkley (OR), Chairman Sherrod Brown (OH), and Sens. Chris Van Hollen (MD), Tina Smith (MN), Cory Booker (NJ), Richard Blumenthal (CT), Brian Schatz (HI), Dianne Feinstein (CA), Raphael Warnock (GA), Patrick Leahy (VT) and Ron Wyden (OR).

Mike Litt, U.S. PIRG’s consumer campaign director, issued the following statement:

“We commend Reps. Garcia and Grothman and the other bill co-sponsors for introducing the Veterans and Consumers Fair Credit Act to protect Americans from predatory lenders.    

“High-cost loans are marketed as fast cash that you can apply for in minutes and walk out the door with. In reality, they’re long-term debt traps, often carrying triple-digit interest rates that can cost more than two or three times the original loan amounts. 

“Rate caps to stop usury are popular across the political spectrum and have passed with flying colors in blue and red states alike. Now, it’s time to protect consumers in all states. 

“We urge members of Congress to cosponsor and move this legislation, both in the House and in the Senate.”