Vote Explanation for H.R. 3299 — Protecting Consumers’ Access to Credit Act of 2017
I voted against H.R. 3299, the Protecting Consumers’ Access to Credit Act of 2017, which would overturn a decision of the Second Circuit Court of appeals in Madden v. Midland by permitting nonbank financial institutions — such as payday lenders — to charge interest rates that exceed certain state caps if a bank makes a valid loan and then sells or transfers the loan to a nonbank.
The bill codifies the “valid when made doctrine,” which ensures that if a loan is valid at its inception, the interest rate cannot be considered unreasonably high or usurious if it is sold or transferred to another person or institution. As written, the bill broadly expands the ability of non-banks to preempt state-level usury and consumer protection laws.
Massachusetts has strict usury laws, and because there is no federal interest rate cap, the interest rate on a loan sold to a payday lender in Utah (which does not have any cap at the state level) could apply if the loan was then sold to a borrower in our state.
Proponents of this legislation argue that the current patchwork of state interest rate laws makes it harder for people to access loans. While payday loans are often the only source of credit for low-income Americans, these lenders are notorious for predatory practices that cause borrowers to fall deeper into debt.
Many states, including Massachusetts, passed stringent laws to prevent consumers from facing absorbently high interest rates, and I cannot support legislation that would undermine these protections.