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New York Representatives Vote to Weaken New York’s Limits on High-Cost Loans


National Consumer Law Center: Lauren Saunders ( or (202) 595-7845; Stephen Rouzer ( or (202) 595-7847
New Economy Project: Sarah Ludwig (212) 680-5100

New York Representatives Vote to Weaken New York’s Limits on High-Cost Loans

Bill Would Allow Lenders to Launder Loans through Banks to Evade New York’s Interest Rate Caps

NEW YORK – Last night, Representatives Gregory Meeks (D-NY-5) and Tom Suozzi (D-NY-3) broke with the rest of the state’s Democrats and joined New York’s Republican members of the U.S. House of Representatives in voting to pass a bill, H.R. 3299, that would allow lenders to launder loans through banks to override limits in New York and other states on high-cost loans, potentially paving the way for loans of up to 300 percent APR in states where those rates are prohibited. The U.S. Senate’s companion piece of legislation is S. 1642 and was introduced by Senator Mark Warner of Virginia.

“New York electeds who voted for this bill invoke the thin guise of innovation’ and ‘credit access,’ but we can all plainly see that they are in fact putting the interests of predatory lenders and debt collectors before the public interest,” said Sarah Ludwig, founder and co-director of New Economy Project, based in New York City. “There’s so much at stake with this bill for all New Yorkers — and this effort to gut our strong state consumer protections reflects patent disregard for racial and economic justice.”

“New York has a criminal usury cap of 25 percent, but this bill overturns a court decision that prevented evasion of New York’s rate caps. If this bill passes, payday lenders will try to launder loans through banks, which don’t have to obey state interest rate limits, to make 100 to 300 percent loans that are illegal in New York and other states,” said National Consumer Law Center Associate Director Lauren Saunders. “Make no mistake: payday lenders will try to exploit this bill to obliterate state interest rate caps, the simplest and most effective method to protect consumers from unaffordable loans.”

“The last thing Long Island needs is another round of high-cost lending siphoning wealth from low-income communities and communities of color,” said Ian Wilder, Executive Director of Long Island Housing Services, Inc. “This bill undermines the work of Long Islanders who have vigorously resisted attempts to open up the floodgates to predatory payday lending in New York.”

More than 200 local, state, national, faith, and veteran groups oppose the legislation. Twenty attorneys general, including New York’s, also oppose related provisions in another pending bill (the CHOICE Act), noting in a letter to the U.S. House: “It is essential to preserve the ability of individual states to enforce their existing usury caps and [we] oppose any measures to enact a federal law that would preempt state usury caps.”

“By weakening state usury laws, the bill would lead to the entry of payday lending into New York and allow predatory lenders to target the poor and communities of color,” said Adriene Holder, Attorney-In-Charge of the Civil Practice at The Legal Aid Society. “New York’s elected officials must side with consumers over special interest that only seek to enlarge their profits. Lawmakers must do better.”

The pending legislation would override the Second Circuit’s Madden v. Midland decision to state that if a loan’s interest rate is legal when the loan is made, the loan remains valid even if it is assigned to another lender that cannot charge those rates. Marketplace lenders and some high-cost lenders have used banks (which are not subject to state interest rate caps) to originate loans that they cannot make directly, which the bank then instantly assigns to the real lender. However, some courts have questioned if the bank is the true lender. A separate bill, HR 4439, would specify that the true lender is determined by the paperwork, not the company that has the predominant interest in the loan.


New Economy Project works with community groups to build a new economy that works for all, based on principles of cooperation, democracy, equity, racial justice, and ecological sustainability.

Long Island Housing Services is the island’s only private fair housing advocacy and enforcement agency serving Nassau and Suffolk counties.

The Legal Aid Society is a private, not-for-profit legal services organization, the oldest and largest in the nation, dedicated since 1876 to providing quality legal representation to low-income New Yorkers.

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witne15ss services, and training.