Bank CEOs Speak Out On Rate Caps
Last week, CEOs from the largest U.S. banks testified before the Senate Banking and House Financial Services Committees about several topics, including proposals for a federal 36% rate cap on all loans.
In the Senate Banking Committee hearing, Senator Jack Reed (D-RI), who is leading efforts on a rate cap bill alongside Banking Chairman Sherrod Brown (D-OH), spoke of his efforts to expand the Military Lending Act rate cap to all consumers and heavily criticized the payday lending industry. When asked about a national rate cap, most of the CEOs answered that they would have to consider the implications of potential 36% APR cap and see the legislation before answering. A couple of the panelists noted that they do not provide retail operations or have a small consumer operations.
The next day before the House Financial Services Committee, representatives from both JPMorgan and Citigroup provided a different and more specific take on APR rate caps. Congressman William Timmons (R-SC) asked the CEOs about access to small-dollar credit for consumers. JPMorgan CEO Jamie Dimon, said, “It’s impossible to do loans like that and make a profit. That’s precisely why we don’t do it. And there’s no safe harbor, it doesn’t affect us. So, I’m not going to fight that [rate cap bill].”
Additionally, during the hearing Rep. Al Lawson (D-FL), expressed support for small-dollar credit for his constituents, especially in the absence of banks. AFSA is pleased that more and more policymakers understand that traditional installment lenders play a crucial role for consumers, particularly in areas where options for credit are limited, or where consumers’ ability to access credit due to less than stellar credit may limit their options.
Just as banks cannot afford to offer small dollar loans at 36%, traditional installment lenders cannot afford to offer consumers such loans. AFSA will continue to educate policymakers and the public on the disastrous effect arbitrary rate caps would have on the lives of ordinary Americans. Learn more at caseforcredit.com.
June 2nd, 2021
