S 2781119th CongressIn Committee

Protecting Consumers from Unreasonable Credit Rates Act of 2025

Introduced: Sep 11, 2025

Financial Services

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Protecting Consumers from Unreasonable Credit Rates Act of 2025 would amend the Truth in Lending Act to impose a nationwide cap on the “fee and interest rate” charged to consumers for most credit extensions. The bill sets a hard 36 percent cap and defines the rate to include nearly all fees and costs associated with a credit transaction. It would require lenders to calculate and disclose this rate for both open-end and other (closed-end) credit, with limited tolerances for certain small fees. Violations would carry significant civil and criminal penalties, and state attorneys general could bring enforcement actions. The bill also clarifies disclosure requirements (including a new “FAIR” label for open-end plans) and states that state laws offering greater protections could still apply. The overall aim is to curb predatory lending by closing loopholes and offering alternatives to high-cost credit.

Key Points

1National maximum: No creditor may extend credit if the “fee and interest rate” exceeds 36 percent, for any consumer credit transaction. The rate includes all charges tied to the extension or availability of credit, such as interest, default fees, insurance premiums, and ancillary products.
2What counts as the rate: The rate includes (a) all charges that are part of the finance charge, (b) credit insurance premiums, (c) fees for ancillary/optional services, and (d) costs tied to products that fund the consumer upfront with automatic repayments after a pay cycle. It also includes certain costs tied to the repayment process.
3Tolerances (caps on small fees): Certain small charges do not count toward the 36% rate if specific conditions are met, including:
4- Application/participation fees limited to the greater of $30 or 5% of the credit limit (up to $120) under defined circumstances.
5- Late fees of up to $8 per late payment or per month.
6- Insufficient funds (NSF) fees up to $15.
7Calculation methods:
8- Open-end plans: the rate is computed monthly as the sum of all fees/finance charges charged in the preceding year divided by the average daily balance; if the plan is younger than a year, a prorated method applies.
9- Other credit plans: uses a calculation method aligned with the APR rules in section 107(a)(1), but the “finance charge” includes all fees and charges described in the bill.
10Enforcement and penalties:
11- Civil remedies: Violations render any related payment and consideration void and require the creditor to return principal, interest, and other sums to the consumer; recoupment can be used as a defense in related collection actions.
12- Criminal penalties: Each violation can incur up to 1 year in prison and a fine the greater of three times the total debt or $50,000.
13- Enforcement by State AGs: State attorneys general may bring actions in federal or competent courts within 3 years for injunctive relief.
14Disclosure changes: For open-end plans, the disclosure would use a new “FAIR” label representing the rate established under the bill, replacing current language in existing disclosures.
15Relationship to state law: The act does not preempt state laws that provide greater protections; it creates a national standard but allows stronger state protections to stand.
16Scope and policy goals: The bill cites past attempts to curb predatory lending and argues for a comprehensive federal cap to close loopholes, reduce high-cost lending across all states, and promote affordable alternatives (e.g., small-dollar loans with minimal or no fees, installment plans).

Impact Areas

Primary group/area affected- Consumers nationwide who use consumer credit (open-end and closed-end) would be subject to the 36% rate cap, affecting access to high-cost credit products like payday loans, storefront/online lenders, car-title loans, and high-cost overdrafts.Secondary group/area affected- Lenders and financial service providers (including payday lenders, car-title lenders, overdraft providers, installment lenders, and banks offering small-dollar credit) would need to redesign products, pricing, and disclosures to comply with the cap and calculation methods.- Financial regulators (U.S. Bureau of Consumer Financial Protection) would implement definitions, calculation methods, tolerances, inflation adjustments, and disclosures, and would oversee enforcement and potential rulemakings.Additional impacts- State Attorneys General could use the new framework to pursue enforcement; some states with stricter protections may already align with or exceed the federal cap.- Potential shifts in credit markets toward lower-cost products or alternatives to high-cost lending, and associated changes in access to credit for very low-income borrowers or those with limited credit options.- Compliance costs for lenders and potential consolidation in sectors focused on high-cost short-term credit; possible changes in consumer financial education and awareness regarding cost disclosures.

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