Why It Matters
A 36% cap on short-term, small-dollar loan rates may shrink the supply of those loans if the cap does not cover lenders' funding costs, according to a new Congressional Research Service (CRS) report.
The finding bears on payday loan regulation as the Senate Committee on Banking, Housing, and Urban Affairs holds S. 3793, the Predatory Lending Elimination Act. The bill would amend the Truth in Lending Act to set a 36% annual percentage rate (APR) limit on such loans.
CRS describes the estimates of large lending reductions it cites as projections made for the 2017 rule, not observed outcomes.
The Big Picture
Consumer groups raise concerns about affordability and debt traps, CRS says. The lending industry raises concerns that regulation could limit the availability of loans.
CRS says these loans often carry triple-digit APRs, but the standard APR calculation "arguably overstates the actual cost of loans if their repayment terms are less than a full year." The report adds that the lack of standardized loan features makes cost comparisons difficult for borrowers and regulators.
The Consumer Financial Protection Bureau (CFPB) issued a rule in 2017 that required lenders to underwrite certain loans for affordability. Before the rule's compliance date, the CFPB projected a 55% to 62% decrease in the number of loans offered by alternative financial service providers. A study by Charles River Associates, commissioned by the industry, projected an 82.5% decrease.
The CFPB revoked the underwriting provisions in a 2020 rule, so neither projection could be tested. The provision limiting lenders' collection attempts stayed in place.
CRS reports that the CFPB announced in 2025 that it would not prioritize enforcement or penalties on the payment provisions. The agency said it would pursue actions to narrow or reconsider the rule, according to its March 28, 2025 statement. CRS says the CFPB had not introduced a replacement framework as of the report.
The report also notes that the Credit Card Accountability Responsibility and Disclosure Act of 2009 caps subprime credit card fees at 25% of the initial credit limit. CRS says that cap limits banks' ability to compete with payday lenders.
The Bottom Line
S. 3793 was read twice and referred to the Senate Banking Committee on Feb. 5, and no later action is recorded. Congress could codify a fixed cap or delegate rate-cap authority to the CFPB, which could then adjust or dismantle caps if earlier challenges resurface. Either path would change the terms on which lenders weigh offering these loans.
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