Protecting Consumers from Unreasonable Credit Rates Act of 2025
The Protecting Consumers from Unreasonable Credit Rates Act of 2025 would add a nationwide cap on credit costs to the Truth in Lending Act. It sets a 36 percent “fee and interest rate” cap for consumer credit transactions, applying to all charges connected with a loan or extension of credit (not just the interest rate). The bill defines what counts toward the 36% cap, prescribes how the rate must be calculated (including for open-end lines of credit and other credit plans), and allows certain small-fee tolerances that can be excluded from the rate. It also creates strong enforcement tools: criminal penalties for violations, civil remedies requiring the return of principal and fees, and enforcement by state attorneys general. The act requires a new disclosure format for open-end credit and states that federal rules cannot exempt lenders from this cap, while preserving states’ ability to provide greater protections. In short, if enacted, the bill would forbid most consumer lending at rates above 36% when all fees are counted, force lenders to disclose the combined “fee and interest rate” clearly, and provide broad enforcement to protect borrowers nationwide. It explicitly targets predatory lending practices while signaling support for safer, low-cost lending alternatives.
Key Points
- 1National 36% cap: The bill prohibits any creditor from extending credit to a consumer if the fee and interest rate (the total cost of credit, including all fees) exceeds 36 percent.
- 2What counts toward the rate: The “fee and interest rate” includes all charges tied to the credit transaction—finance charges, late fees, insufficient funds fees, default-related charges, credit insurance premiums, and even costs for ancillary products or automatic-pay arrangements, plus any costs for funds disbursed and repaid through third-party providers.
- 3Tolerances and inflation adjustments: Certain small fees are excluded from the 36% cap (e.g., limited application/participation fees, late fees up to a specified amount, and small insufficient-funds fees). The Bureau can adjust these tolerances over time to reflect inflation, so the cap remains meaningful.
- 4Calculation methods and scope: The rate must be calculated differently for open-end credit plans (like credit cards) versus other credit arrangements, with specific formulas tied to charges over time and average balances. The Bureau can adjust calculations to ensure the cap is not circumvented.
- 5Enforcement, penalties, and remedies: Violations can lead to criminal penalties (up to 1 year in prison and fines up to the greater of three times the debt or $50,000 per violation). Civil remedies require the creditor to return principal, interest, and related charges; violations can be raised in court or via state AGs within a three-year window. The act also allows injunctive relief through state enforcement.
- 6Disclosure changes for open-end credit: For open-end plans, the disclosure of cost to the borrower would switch to display the combined “fee and interest rate” as a new metric labeled “FAIR,” under a future section (Section 141), replacing the prior disclosure format.
- 7State role and preemption: States can’t be preempted from providing greater protections; the bill maintains room for stronger state laws, but it also imposes a federal cap that would generally apply to nationwide consumer credit unless a state law offers more protection.