The Iowa legislature has passed a bill that raises Iowa’s interest rate cap on consumer credit to 36% per year. This would apply to short term “consumer loans” used to finance a specific purchase, like an appliance, or to cover unexpected expenses.
Senator Scott Webster, a Republican from Bettendorf, said the bill aligns Iowa regulations with the federal government and what’s on the books in neighboring states and that will benefit Iowans. “People who need quick dollars in order to make ends meet have that availability in the state of Iowa and not just get declined because the interest rate can’t be charged to match the risk,” Webster said. “…We also shouldn’t want to see them go online and get them from national companies where they have no customer service or availability to make sure that loan is regulated and looked at in a good way.”
Current Iowa law limits interest rates on these types of loans to between one and three percent. depending on the loan amount. Democrats in the House and Senate opposed the bill. “Iowans are already struggling with affordability and rising prices and the response cannot be to raise the interest rate on their consumer loans,” said Representative Adam Zabner, a Democrat from Iowa City. “This bill is just plain wrong.”
The organization that represents short-term lenders is urging Governor Reynolds to sign the bill into law. The group estimates 250,000 more Iowans would be able to access new loans next year if Iowa’s interest rate cap goes up to 36%.
