AFSA Comments on IA Rate Cap Bill
Today, AFSA’s State Government Affairs Team sent a letter to the Iowa House Ways and Means Committee expressing concerns with HF 893, which would change the maximum rate for consumer loans in Iowa to a rate cap based on the federal military annual percentage rate (MAPR). Unlike the definition of annual percentage rate (APR) in the federal Truth in Lending Act (TILA), MAPR includes the cost of voluntary goods, services, or insurance that are unrelated to the cost of credit and are not comparable across credit products. The bill would undermine TILA and affect the ability of creditors to offer credit to Iowa consumers. Numerous states have recognized the importance of keeping state law consistent with TILA and rejected MAPR rate caps, and only two states have enacted such proposals into law.
In the letter, AFSA argues that, while Iowa’s rate structure for small loans is in need for modernization, MAPR is not the right solution for Iowa. The MAPR would severely limit the ability of licensed traditional installment lenders to offer consumers safe and affordable forms of credit. The current rate cap of 21 percent excludes large swaths of Iowa consumers from accessing traditional installment loans (TILs), which are widely recognized as safe alternatives to payday loans by government officials on the state and federal level. TILs provide consumers the ability to borrow money safely and improve their credit scores.
This letter, along with SGA’s other recent letters, can be found on the direct advocacy section of AFSA’s website. It can also be found on AFSA’s APR resources page.
May 11th, 2021
