Predatory Lending Elimination Act

Bill Number

S. 3793

Origin Chamber

Senate

Congress

119th Congress, Session 2

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2026-02-05: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. (Sponsor introductory remarks on measure: CR S511-512)

Last Updated

2026-02-26T16:42:03Z

AI-Generated Summary

Purpose

The Predatory Lending Elimination Act (S. 3793) aims to protect all consumers from high-interest predatory loans by extending the consumer credit safeguards currently available only to active-duty military members and their dependents under the Military Lending Act (MLA). These protections, found in section 987 of title 10 of the U.S. Code, cap interest rates and restrict certain loan terms to prevent exploitation.

Key Provisions

• Extension of Military Lending Act Protections: Applies the MLA's limits on interest rates (generally 36% annual percentage rate, or APR, including most fees) and prohibitions on abusive practices (like mandatory arbitration or prepayment penalties) to all consumer credit extended by creditors, treating all borrowers like military personnel.
• Exceptions to Coverage:
• Residential mortgages (home loans).
• Auto loans specifically for purchasing a vehicle, secured by the car itself.
• Loans from federal credit unions, as long as they follow the interest rate limits set by the National Credit Union Administration.
• APR Calculation for Open-End Credit (e.g., credit cards): Uses standard Truth in Lending Act (TILA) methods, adjusted per Department of Defense (DoD) rules from 2015. For credit cards, certain bona fide fees (non-periodic charges compliant with TILA rules) are excluded from the finance charge calculation, but credit insurance, debt cancellation/suspension fees, or ancillary product fees are not.
• No Exemptions Allowed: The Consumer Financial Protection Bureau (CFPB) cannot grant waivers or exemptions for this section.
• State Law Compatibility: Does not override state laws that offer stronger consumer protections.
• Enforcement and Penalties:
• Borrowers can seek remedies (e.g., refunds, damages) similar to those under the MLA for violations.
• State attorneys general can sue in federal or state court within 3 years of a violation to enforce the law and secure remedies.
• State regulators can take action against state-chartered or licensed lenders within 3 years.
• Follows notice and coordination rules from the Consumer Financial Protection Act for state actions.
• Rulemaking: The CFPB, consulting with the DoD, must issue implementing rules within 1 year of enactment, consistent with existing DoD MLA rules, and notify Congress and the public. Rules cannot weaken protections compared to those for military borrowers.
• Effective Date: Applies to new credit extensions starting 18 months after enactment or when CFPB rules take effect, whichever comes first.

Significant Changes to Existing Law

• Adds a new section (140B) to Chapter 2 of the TILA (15 U.S.C. 1631 et seq.), directly incorporating MLA restrictions into civilian consumer credit law for the first time.
• Removes the military-only focus of the MLA, broadening its scope without altering the original military protections.
• Prohibits CFPB from exempting entities, unlike some other TILA provisions, and empowers states with explicit enforcement roles, enhancing federal-state coordination.

Potential Impacts

• On Consumers: Provides broader access to affordable credit by capping rates at 36% APR, potentially reducing debt burdens and preventing predatory lending practices that target vulnerable groups, though some high-risk borrowers might face reduced credit availability.
• On Creditors and Lenders: Imposes uniform rate caps and restrictions, which could limit profits from high-interest products (e.g., payday loans, some credit cards), prompting lenders to adjust offerings or pricing; federal credit unions are partially shielded.
• On Government Agencies: Increases CFPB's regulatory workload for rulemaking and oversight; DoD's role is consultative; states gain new enforcement tools, potentially leading to more litigation and compliance monitoring.
• On International Relations: Minimal direct impact, as it focuses on domestic U.S. consumer credit.

Main Stakeholders Affected

• Consumers: All U.S. borrowers, especially low-income or subprime individuals who rely on high-cost credit.
• Creditors and Financial Institutions: Banks, payday lenders, credit card issuers, and non-bank lenders now subject to stricter caps; federal credit unions benefit from an exception.
• Government Entities: CFPB (primary regulator), DoD (advisory role), state attorneys general and regulators (enforcement), and Congress (notified of rules).
• Military Personnel: Retain their existing protections, with no dilution.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens TILA enforcement by borrowing MLA's penalty structure, potentially increasing civil lawsuits; explicit non-preemption of stronger state laws respects federalism principles under the U.S. Constitution, avoiding Supremacy Clause conflicts.
• Constitutional: No major challenges anticipated, as it regulates interstate commerce (a congressional power), but could invite due process scrutiny if rate caps are seen as overly burdensome on lenders' property rights.
• Political: Sponsored by a bipartisan group of senators focused on consumer rights, it signals a push against predatory finance post-financial crisis; may spark debate on balancing consumer protection with credit access, especially in states with varying lending laws.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Reed, Jack [D-RI]

Cosponsors (15)

Sen. Blumenthal, Richard [D-CT], Sen. Duckworth, Tammy [D-IL], Sen. Fetterman, John [D-PA], Sen. Heinrich, Martin [D-NM], Sen. Luján, Ben Ray [D-NM], Sen. Merkley, Jeff [D-OR], Sen. Padilla, Alex [D-CA], Sen. Schatz, Brian [D-HI], Sen. Smith, Tina [D-MN], Sen. Van Hollen, Chris [D-MD], Sen. Whitehouse, Sheldon [D-RI], Sen. Warnock, Raphael G. [D-GA], Sen. Welch, Peter [D-VT], Sen. Wyden, Ron [D-OR], Sen. Booker, Cory A. [D-NJ]

Recent Actions

• 2026-02-05: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. (Sponsor introductory remarks on measure: CR S511-512)
• 2026-02-05: Introduced in Senate

Bill Versions

• Predatory Lending Elimination Act — issued 2026-02-05 — PDF (8 pages)