WASHINGTON, D.C. -

What at least one industry expert cautioned about potentially happening — the proliferation of an Illinois regulation connected with the Military Lending Act (MLA) — is gaining federal momentum again on Capitol Hill.

Last week, the American Financial Services Association (AFSA) recapped that Rep. Jesús “Chuy” García, an Illinois Democrat, Rep. Glenn Grothman, a Wisconsin Republican and other House Democrats reintroduced a 36% “all-in” rate cap proposal.

AFSA explained the measure entitled The Veterans and Consumers Fair Credit Act (H.R. 5974) would extend the MLA rate cap to all consumers.

While lawmakers emphasized implications within installment lending, compliance expert Randy Hendrick explained back in May how this type of regulation can impact auto financing, too.

The latest moves at the federal level triggered this statement from Bill Himpler, who is president and chief executive officer at AFSA.

“The Military Lending Act’s 36% rate cap has not only proven to be unworkable based on recent actions brought by the Consumer Financial Protection Bureau, with active military personnel racking up debt with predatory lenders, but also unknowable, because the Department of Defense to date has released no data on the effect of the rate cap on military personnel and their families,” Himpler said.

“Now, in a period of great economic uncertainty, when U.S. consumers may need greater access to credit due to rising prices for everyday staples, including gas to get to work, the House of Representatives may consider creating even greater financial uncertainty with a 36% rate cap for all American consumers. Less access to traditional installment lenders is not the way to help consumers, and the American Financial Services Association will work to ensure policymakers understand the harm that a rate cap could create for both consumers and the broader American economy,” he continued.

García and Grothman first introduced their proposal in 2019. In a news release distributed in November of that year, each lawmaker made their cases for this regulation.

“Predatory loans are trapping families in a cycle of debt. We know that the Military Lending Act has preserved access to credit while protecting consumers from predatory payday lenders. Some states have extended these proven protections to all their residents, but my constituents in Illinois remain vulnerable to payday loans, debt collection, vehicle repossessions, and more. Veterans and consumers deserve the same protections from vicious debt traps that active-duty service members receive, and the Veterans and Consumers Fair Credit Act will do just that,” García said.

“Usury has been condemned since Biblical times,” Grothman said. “Historically, the United States has had usury laws, putting a guard rail up for borrowers. As more and more loans are given online, it becomes more difficult for states to deal with the problem of snowballing debt.

“We already protect military service members under the Military Lending Act, which means that we have recognized the predatory nature of high-interest loans to our men and women in uniform,” Grothman continued. “This raises the question — if it is wrong to allow predatory lenders to target our service members, why is it right to let them target the rest of the community?”