What Effects Would the All-in 36% Rate Cap Have?


The all-in 36% rate cap could reflect badly on credit cards and small-dollar loans, CUNA stated in a letter to the Senate Committee on Banking, Housing, and Urban Affairs.

On Thursday, 29 July, the Committee met in an open session to discuss imposing a 36% interest rate cap on all lenders, not just the members of the military.

The Senate Democrats are pushing for the adoption of the legislation since they believe it would prevent pay-day loan debt traps.

The interest rate cap would apply to every credit transaction, from payday loans to student and young adult credit cards. Democrats stand behind their claim that people who use payday loans end up overpaying their loans through repayments.

In the letter the Credit Union National Association (CUNA) wrote, they explain that credit unions saw the harm caused by high-cost payday loans and that they support the efforts which will finally put a stop to these abuses.

However, not everyone seems satisfied in case this legislation passes. The Republicans are still against it because a 36% interest rate cap would make it difficult to access credit.

Pushing Borrowers Out of Small-Dollar Loans

Pat Toomey took the stand on behalf of the Republicans explaining that those who have low credit scores would suffer immensely from the “all-in” 36% rate cap.

There are people who think that the passing of the rate cap will result in borrowers getting cheaper credit, however, many spoke to oppose the legislation. Some of the opponents claim that the new bill will fail to help people who are most in need of a loan, particularly Black and low-income communities.

For a lender to offer even a small-dollar loan of $100, he would need to charge 140% APR which seems impossible with the new legislation, the Bank Policy Institute explains. Lenders cannot afford to lend at that rate, and the result will be that they will stop lending at all.


My eyes rarely take a break from staring at my laptop's screen—I am Big Brother, scanning the web for news and information worth sharing. Full transparency—a substantial chunk of my screentime is also dedicated to watching TV shows, but balance is key, right? Writing is how I choose to share my findings with the world while keeping my love of language and creativity alive.

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