Protecting Consumers from Unreasonable Credit Rates Act of 2025
Summary
The "Protecting Consumers from Unreasonable Credit Rates Act of 2025" aims to establish a national usury rate for consumer credit transactions by amending the Truth in Lending Act. It sets a maximum annual interest rate of 36% on most consumer credit, encompassing all fees and charges. The bill seeks to eliminate predatory lending practices and provide clearer terms for borrowers.
Expected Effects
This act would cap interest rates on various forms of credit, potentially reducing the cost of borrowing for consumers, especially those with low incomes. It could also lead to a decrease in the availability of short-term, high-interest loans. The legislation aims to protect consumers from predatory lending practices by setting a federal standard.
Potential Benefits
- Reduced cost of borrowing for consumers, particularly those with low incomes.
- Elimination of loopholes that allow for high-cost lending.
- Increased transparency in lending practices through mandated disclosures.
- Protection against predatory lending practices.
- Encouragement of alternative, more affordable small-dollar loans.
Most Benefited Areas:
Potential Disadvantages
- Potential reduction in the availability of credit for high-risk borrowers.
- Possible negative impact on businesses that offer short-term, high-interest loans.
- Increased regulatory burden for lenders.
- Potential for lenders to find new ways to circumvent the regulations.
- Possible unintended consequences on the overall credit market.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with Congress's power to regulate commerce under Article I, Section 8, Clause 3 (the Commerce Clause) by establishing uniform rules for lending practices across state lines. It also indirectly promotes the general welfare, as mentioned in the Preamble, by protecting consumers from financial exploitation. The Tenth Amendment reserves powers not delegated to the federal government to the states, but this bill's preemption clause is limited, allowing states to provide greater consumer protection.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).