The power to regulate controversial non-bank products such as installment, title and payday loans could be snatched away from states under a congressional proposal. Photo by Courtesy Orin Zebest
The power to regulate controversial non-bank products such as installment, title and payday loans could be snatched away from states under a congressional proposal.
The Consumer Credit Access, Innovation and Modernization Act, or HR 6139, establishes a new federal charter for nonbanks--also called non-depository creditors--and regulates them.
If federally approved as a National Consumer Credit Corporation, critics say, the lenders will be able to circumvent state laws that have gotten tough on the installment loan industry in recent years.
In response to the resolution, sponsored by Rep. Blaine Luetkemeyer, R-Mo., 40 Republican and Democratic attorneys generals sent a letter to the majority and minority leaders in the House and Senate, warning of the act's potential negative effects.
"By preempting state laws, the proposed legislation would impede state efforts to immediately and directly protect consumers from harm," Mississippi Attorney General Jim Hood said in a news release.
Hood, a Democrat, joined two Republican AGs from the South--Sam Olens of Georgia and Buddy Caldwell of Louisiana--in signing a letter of opposition to House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.
During the 2012 legislative session, a bill died that would have raised the interest cap from current levels of 36 percent to 99 percent.
The change would have meant that on a typical $1,500 loan with a 24-month term, the cost of repaying the sum, including interest and fees, would have gone up $884.88, about $37 per month.
HR 6139 awaits now awaits congressional committee action.
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