WASHINGTON, May 9 – Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) unveiled new legislation, The Loan Shark Prevention Act, to combat the predatory lending practices of America’s big banks and protect consumers who are burdened with exorbitant credit-card interest rates. The legislation imposes a 15-percent federal cap on interest rates and empowers individual states to establish lower limits.
The lawmakers also outlined a plan to build and expand basic post office banking services as an accessible, affordable alternative to check-cashing and payday-lending businesses.
“The reality is that today’s modern-day loan sharks are no longer lurking on street corners breaking kneecaps to collect their payments,” said Senator Sanders. “They wear three-piece suits and work on Wall Street, where they make hundreds of millions in total compensation and head financial institutions like JPMorgan Chase, Citigroup, Bank of America and American Express.”
“Under the legislation we are introducing today, we would establish a national usury rate to make sure that no bank or store in America could charge an interest rate higher than 15 percent,” Sanders said.
Representative Ocasio-Cortez stated, “There is no justifiable reason that a person—no matter their background—should be charged an interest rate higher than 15 percent. Rates higher than 15 percent are predatory debt traps, designed to keep working families underwater and allow predatory companies to enrich themselves off the misfortune of others.”
Despite the fact that banks can borrow money today at less than 2.5 percent from the Federal Reserve, the median credit-card interest rate today for consumers is an astounding 21 percent.
The lawmakers outlined postal banking as a common-sense alternative to predatory lenders in a co-authored Medium post. “Post offices exist in almost every community in our country. There are more than 31,000 retail post offices in this country. An important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services,” they wrote.
“The Postal Service already cashes Treasury checks and issues money orders. The USPS should fully exercise its existing statutory authority and implement pilot programs offering affordable financial services, including ATMs, paycheck cashing, bill payment and electronic money transfers in post offices,” they concluded.
The Loan Shark Prevention Act was lauded by consumer advocacy groups, and garnered the endorsements of Consumer Action, NETWORK Lobby for Catholic Social Justice, Demand Progress Action, Franciscan Action Network, National Advocacy Center of the Sisters of the Good Shepherd, CREDO Action, Community Change Action, Center for Popular Democracy, American Federation of State, County and Municipal Employees (AFSCME), and People’s Action.
Read a bill summary here.