WASHINGTON – In reaction to a new Bulletin from the Office of the Comptroller of the Currency (OCC) that encourages banks to offer small-dollar loans, advocates at the National Consumer Law Center emphasized that banks must make affordable loans of 36% or less and stay away from rent-a-bank payday loans.
“The OCC bulletin appropriately emphasizes the importance of determining a borrower’s ability to repay, along with reasonable and transparent pricing and terms that do not result in costs disproportionate to the amount borrowed. But banks must go farther and limit the loans to 36% APR or less to avoid high-cost debt-trap lending,” said Lauren Saunders, associate director of the National Consumer Law Center. “The 36% interest rate cap has a long history going back over 100 years, widespread public support, and increasing acceptance as the dividing line between predatory and mainstream small-dollar loans. Higher interest rates encourage misaligned incentives, with lenders profiting while consumers default.”