Public Opinion and the Limits of State Law: The Case for a Federal Usury Cap

Each year, states pour millions and millions of dollars of taxpayer money into regulating high-cost credit products like payday, title, and installment loans. These loans typically carry interest rates of 400-1,000% per annum. Most Americans are unaware that it is legal to charge these rates in some states. Moreover, most Americans, regardless of political affiliation, favor capping interest on consumer loans at 36% or less. While a number of states do cap interest on all consumer loans at 36% or less, the majority does not; the majority chooses instead to leave these loans unregulated or to use another regulatory approach. The regulatory approaches used by states have largely failed to meet states’ goals of curbing abuses in high cost lending. As a result, states and individuals have taken to the courts to address abuses in high cost lending. These litigation efforts have also proven to be highly expensive and largely ineffective methods of curbing abuses in high cost lending. Because Americans overwhelmingly favor interest rate caps on consumer loans, and because states have been unable to deliver them, this Article calls on Congress to impose a federal usury cap on all consumer loans and suggests statutory language for doing so. This solution could protect consumers who use the loans and save taxpayer money for all Americans.