Many states are failing to provide adequate protections for consumers against extremely expensive credit according to a new report by the National Consumer Law Center, Consumer Federation of America, and Consumers Union. The Scorecard updates a 2008 report and grades states on how well they protect consumers from excessive interest charges on small loan products.
States traditionally regulate the rates and terms for nonbank small loan products. The report evaluates how well states are doing on curbing usury by examining the statutory maximum annual percentage rate (APR) of interest and fees for four typical small-dollar loan products and whether these products’ APRs are limited by the state’s criminal usury cap. The four loan products evaluated in the report are payday loans; auto title loans; six-month, $500 unsecured installment loans; and one-year, $1,000 unsecured installment loans.
States received a “Passing” grade if the loan product’s APR was 36 percent or less or if they prohibited payday or auto title loans. States that did not have a cap on the loan product’s APR or those that allowed a loan product’s APR to exceed 36 percent received a “Failing” grade.
Click below for a PDF of the report. Click here for a chart describing the statutory schemes by state.