Report criticizes Delaware for not having an interest rate cap on large loans

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Delaware and 11 other states have been attacked for not having an interest rate cap on loans, according to a report from the National Consumer Law Center.

“Our analysis shows a general consensus among states that APR ceilings should be well below 36% for these larger, longer-term loans,” said Carolyn Carter, deputy director of the National Consumer Law Center, senior author of the report.

Advocates of high-interest loans say the interest rates reflect the lender’s risk of not getting the loan money back.

The loan laws of Delaware, Missouri, North Dakota, Ohio, and Virginia have no limits. Other states have no cap on interest rates but ban figures that “shock the conscience”.

The report was for a loan of $ 10,000 over five years.

Recommendations include

  • Impose a cap on interest rates.
  • Prohibit or strictly limit the cost of credit insurance and other complementary products
  • Make sure the consumer can afford to repay the loan.

The absence of such a cap brought banks to Delaware in the 1980s, with financial services remaining a key industry in the state.

Efforts to authorize interest rate caps are almost non-existent in Delaware, in large part due to the presence of the banking industry.

Some steps have been taken to tackle the abuse of payday loans with interest rates as high as hundreds of percentage points.

The changes came after a chancellery court ruling implicating a woman whose small loan exploded after failing to keep up with payments.

Payday loans are described in other states including Pennsylvania.


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