Independent Women’s Forum – 2/5/2020 (reprinted)
If you had a $400 emergency like car damage or sudden medical bill, could you afford to pay it?
Unfortunately, 40 percent of Americans (and half of military families) don’t have enough saved to cover such a bill. They might turn to payday or title lending company for a quick loan, knowing they would be able to pay it back from their next paycheck.
Millions of Americans rely on lending companies for access to cash and capital when they need it, but members of Congress may shut these options down if they get their way. It will only drive our military servicemen and women and struggling Americans living paycheck-to-paycheck to turn to more costly alternatives like overdrafting accounts or late payment fees.
Today, Congresswoman Maxine Waters is hosting a hearing entitled, “Rent-A-Bank Schemes and New Debt Traps: Assessing Efforts to Evade State Consumer Protections and Interest Rate Caps.” Don’t let the title fool you. Congresswoman Waters wants to shut down the small-dollar loan industry (i.e. payday loans) by limiting how much interest they can charge borrowers to 36 percent. That 36-percent cap is applied to loans for servicemembers and she wants to extend it to all Americans.
Proponents of this cap claim this will protect borrowers from paying high interest rates that sometimes they cannot afford to repay on time. That is not what would happen.
The 36-percent cap for service members may have been well-intended by Congress but ended up cutting them off from small-dollar loans. According to one poll, a majority of military households have been denied loan products and access to credit because of this congressional interest rate cap.
We might ask why Americans and service members don’t simply…