When Ohio passed a law limiting the fees and interest payday lenders could charge borrowers, most thought it would end the practice that cost people exorbitant sums.
But a federal rule provided a way for short-term lenders to skirt state laws. Congress is now working to repeal the rule.
In a narrow vote of 52-47, the Senate repealed the so-called “true lender rule.”
Three Republicans—Susan Collins of Maine, Cynthia Lummis of Wyoming, and Florida's Marco Rubio—joined Democrats, including banking committee chairman Sherrod Brown (D-OH) who led the effort.
“The payday lenders had not had a loss on the Senate floor, roll call vote in 15 years," said Brown.
Supporters of the rule fear its repeal will cause regulatory uncertainty for national lenders that partner with local entities.
But Brown says it allowed those national companies to avoid state interest rate caps.
“Those sleazy practices that they prey on working families and prey on families where things have gone wrong...their car breaks down., they've lost their job, they turn to payday lenders and they can never get out of it," Brown said. "This will stop that."
If approved by the House, President Joe Biden has indicated he’ll sign the repeal.
Brown is also working to expand a measure that protects active-duty service members from predatory lending practices.
The Military Lending Act caps interest rates on most consumer loans at 36% for active-duty military and their dependents. He wants to see all Americans protected.
“That should apply to everybody. And that's that's our next step in this. Working with Sen. [Jack] Reed (D-RI), a West Point graduate, Democrat on my banking and Housing Committee, who’s led on this, and he and I are teaming up to work on that and we know we're up against the big banks on that, but we plan to win on it.”
