Newsroom

NAFCU and CUNA Tuesday sent a joint letter to Senate leadership flagging the consequences of a new amendment to the proposed government funding “minibus” that would extend Military Lending Act (MLA) provisions to all consumers.

The amendment, from Sens. Jack Reed, D-R.I., and Jeff Merkley, D-Ore., would impose the MLA’s annual percentage rate (APR) cap of 36 percent to all consumer loan products and “completely change the methodology used to calculate interest rates for non-servicemember consumers.”

“While seemingly an innocuous technical change, the broad impact of an all-in APR cap on credit cards and small dollar loans would be seismic,” wrote NAFCU President and CEO Dan Berger and CUNA President and CEO Jim Nussle.

The two explained that this adoption would require lenders to offer larger, longer-term loans – effectively encouraging borrowers to take on more debt and potentially forcing borrowers with lower creditworthiness out of the market for short-term, small dollar loans.

“Small dollar loans, credit cards, and other forms of short-term credit are critical to help people meet emergency expenses, disruptions in pay, and misalignments in the timing of their expenses and income,” Berger and Nussle said. “This amendment’s proposed 36 percent fee and interest cap would make it more difficult for many consumers to obtain credit, thereby harming the very consumers the legislation seeks to protect. Congress should reject these legislative measures.”

Berger and Nussle commended lawmakers on efforts to stop abusive and predatory credit practices, but argued this legislation would have far-reaching implications. They highlighted how credit unions work to support their 138 million members’ financial well-being and address excessive consumer debt problems.

NAFCU continues to monitor government funding discussions as lawmakers work to avert a government shutdown; current funding is set to expire at midnight Sept. 30. In addition to this amendment, NAFCU is also opposed to efforts to attach the big box bailout and an amendment to cap credit cards’ APR at 18 percent to the Senate’s minibus.

Stay tuned to NAFCU Today for the latest out of Washington.