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INFiN makes a statement on the latest national interest rate cap proposal, expressing concerns over its impact on consumer credit access.
INFiN is a Financial Services Alliance that represents and brings together the diverse world of consumer financial services industries.
Financial institutions that are a part of the INFiN organization offer a wide range of essential financial products and services to address the evolving financial needs of US consumers.
The Proposed Rate Cap
On December 14, 2023, INFiN responded to a proposal (S. 3549) made by Senator Jack Reed (D-RI) to implement a national Annual Percentage Rate (APR) cap on consumer credit. This proposal would have a significant impact on consumers in the financial industry, and as a representative of over 350 financial companies, INFin made a statement to address the proposed rate cap.
INFiN’s Statement
INFiN expressed concerns regarding the senator’s proposal and voiced particular concern over the way this proposal would limit consumer access to regulated credit options, ultimately affecting hardworking individuals who rely on these services.
The statement further voices concern that the proposal misunderstands the current consumer credit landscape. INFiN argues that such policies stem from bias rather than data-driven insights, jeopardizing the availability of critical credit options for overlooked or underserved borrowers. The statement highlights the potential consequences of implementing interest rate caps, which could lead to the closure of licensed, regulated lending options for consumers.
“Arbitrary policies such as interest rate caps, born out of bias not data, have proven time and again to result in the closure of licensed, regulated consumer lenders responsible for providing critical credit to borrowers overlooked, underserved, or left behind by more traditional institutions.” —INFiN, A Financial Services Alliance
Contrary to the proposed legislation, data has shown that borrowers consistently express satisfaction with regulated short-term, small-dollar loans. Consumers see these loan options as cost-competitive, transparent, and effective.
Conclusion
Ultimately, INFiN emphasizes the importance of listening to consumer feedback and urges policymakers to prioritize policies that foster a diverse, competitive, and fairly regulated financial market.
The statement underscores the need for policymakers to consider the real-world impact of interest rate cap proposals on consumers and the financial services industry as a whole. Rather than limiting choice and access to credit, policymakers should focus on solutions that promote financial inclusion and empower consumers to make informed decisions about their financial well-being.
