Predatory Lending Elimination Act Imposes 36% Interest Rate Cap on Consumer Loans and Credit Cards

The Predatory Lending Elimination Act aims to bring the same financial protections currently enjoyed by active-duty military members to the general public. By amending the Truth in Lending Act, this bill establishes a national 36% interest rate cap on most consumer credit. This isn't just a suggestion; it applies the strict standards of the Military Lending Act to everyone, effectively putting an end to triple-digit interest rates on payday loans and high-cost credit products. The Consumer Financial Protection Bureau (CFPB) is tasked with finalizing these rules within one year, with full implementation required no later than 18 months after the bill becomes law.

Capping the Cost of Credit

The core of this bill is the 36% Military Annual Percentage Rate (MAPR) limit. Unlike a standard APR, the MAPR calculation is designed to be more inclusive, meaning lenders can’t easily hide the true cost of a loan in various fees. For a worker who finds themselves short on rent and considers a payday loan, this provision could mean the difference between a manageable debt and a permanent financial spiral. However, it’s important to note what is staying the same: the bill specifically excludes residential mortgages and standard auto loans where the car serves as collateral. If you are buying a home or a new truck, your current financing rules won't change under this specific legislation (Sec. 2).

The Fine Print on Plastic

For those of us carrying credit cards, the bill introduces a specific way to calculate that 36% limit. It allows for certain "bona fide" fees—like a standard annual fee—to stay out of the interest rate calculation, provided they are reasonable. But the bill draws a hard line on the extras: charges for credit insurance, debt cancellation agreements, or other "ancillary products" sold with the card must be included when checking if the rate hits that 36% ceiling. This prevents lenders from technically meeting the interest cap while padding their profits with mandatory add-on services that most people don't actually need.

Enforcement and Local Control

This legislation isn't just a federal mandate that leaves you waiting for a D.C. agency to act. It explicitly protects state laws that offer even stronger consumer protections, ensuring that if your state already has a lower interest cap, this bill won't override it. Furthermore, it gives teeth to the rules by empowering state attorneys general and local regulators to sue lenders who violate the cap. This means if a local payday lender tries to skirt the 36% limit by disguising interest as "service fees," state officials have the direct authority to step in and seek remedies on behalf of residents (Sec. 2).