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house Bill H.R. 3299

Should Loans Retain Their Interest Rates if Sold or Transferred Across State Lines by the Lender?

Argument in favor

This commonsense, bipartisan bill brings stability to financial markets by codifying the valid-when-made doctrine for interest rates on loans that are sold or transferred across state lines.

James's Opinion
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02/13/2018
The interest rate should remain the same unless a more beneficial rate becomes available to the borrower
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Robert's Opinion
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02/14/2018
Your loan is a legal contract. You signed that contract with expectation that your payments and interest rates will conform to the terms listed in that contract. To think that your loan could be sold or transferred and, in the process, your payment terms, including interest rate, could be increased willy-nilly without your agreement is an abomination. This should be voted down.
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02/14/2018
Shifting interest on student loans because they were sold to new lenders is exploitative and destructive. Any past incidents of this where borrowers were charged higher rates than they agreed to due to this process should be credited for the amount they paid in excess of the original agreement
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Argument opposed

State usury laws exist to protect consumers against loans with predatory interest rates, and lenders should have to abide by them even when the loans are transferred.

Michael777's Opinion
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02/13/2018
This is yet another subtle move to deregulate predatory loan lenders! Notice how the cosponsors of this bill have accepted thousands of dollars from banks! Follow the money, people!
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Pally-Z's Opinion
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02/14/2018
This bill is confusing. It should be rewritten.
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Anna's Opinion
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02/14/2018
This is an attempt by predatory lenders to get around state laws that protect hardworking Americans from being abused when they are vulnerable. Lenders should have to follow the laws of all the states they practice in, and not be able to get around them just because a loan originated in another state. Represent hardworking Americans and take a stand against predatory lenders.
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
  • The house Passed February 14th, 2018
    Roll Call Vote 245 Yea / 171 Nay
      house Committees
      Committee on Financial Services
    IntroducedJuly 19th, 2017

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What is House Bill H.R. 3299?

This bill would overturn a decision of the Second Circuit Court of appeals and permit nonbank financial institutions to charge interest rates that exceed certain state caps if a bank makes a valid loan and then sells or transfers the loan to a nonbank. It would reaffirm the legal doctrine that a loan’s interest is valid-when-made. This preemption of state usury laws would allow such loans to retain their maximum interest rate regardless of whether the loan is sold, assigned, or transferred to a third party in another state.

Impact

Borrowers; lenders; and banking regulators.

Cost of House Bill H.R. 3299

$0.00
The CBO estimates that enacting this bill would have no effect on the federal budget.

More Information

In-DepthSponsoring Rep. Patrick McHenry (R-NC) introduced this bill to bring consistency to lending laws by codifying the doctrine that loans’ interest rates are valid-when-made and can be transferred across state lines without regard to state interest rate caps:

“By codifying long-standing legal precedent with the valid-when-made doctrine, we ensure that low- and middle-income Americans can access our financial markets. But this bill does more than promote financial inclusion, it also increases stability in our capital markets which have been upended by the Second Circuit’s unprecedented interpretation of our banking laws.”

Original cosponsor Rep. Gregory Meeks (D-NY) added:

“I have been encouraged by the innovative partnerships banks and fintech firms have forged to expand access to credit in under served urban and rural areas. Since the financial crisis, nearly 5,000 brick and mortar branches have shut their doors leaving many consumers without accessibility to affordable financial services. By partnering with fintech innovators, banks — including a number of those certified as Community Development Financial Institutions — have been able to achieve efficiencies in underwriting, allowing them to lower costs and reinvest in communities that stand to benefit the most. Such partnerships should be encouraged by policymakers and I am proud to work with Rep. McHenry to see that they are.”

Some House Democrats expressed opposition to this bill in its committee report:

“Proponents of this legislation argue that the status quo is problematic because it compels national banks to comply with a patchwork of state laws instead of oversight by federal banking regulators. However, if national banks are originating loans that they would not otherwise make because they know they will not hold the loans on their books, but instead immediately transfer them to a third party, this argument goes away as banks will have little to no interest in the loan.”

This legislation passed the House Financial Services Committee on a 42-17 vote and has the support of three cosponsors, including two Democrats and one Republican.


Media:

Summary by Eric Revell

(Photo Credit: ultramarine5 / iStock)

AKA

Protecting Consumers' Access to Credit Act of 2017

Official Title

To amend the Revised Statutes, the Home Owners' Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act to require the rate of interest on certain loans remain unchanged after transfer of the loan, and for other purposes.

    The interest rate should remain the same unless a more beneficial rate becomes available to the borrower
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    This is yet another subtle move to deregulate predatory loan lenders! Notice how the cosponsors of this bill have accepted thousands of dollars from banks! Follow the money, people!
    Like (91)
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    Your loan is a legal contract. You signed that contract with expectation that your payments and interest rates will conform to the terms listed in that contract. To think that your loan could be sold or transferred and, in the process, your payment terms, including interest rate, could be increased willy-nilly without your agreement is an abomination. This should be voted down.
    Like (52)
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    This bill is confusing. It should be rewritten.
    Like (36)
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    Shifting interest on student loans because they were sold to new lenders is exploitative and destructive. Any past incidents of this where borrowers were charged higher rates than they agreed to due to this process should be credited for the amount they paid in excess of the original agreement
    Like (27)
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    How is this even a question? The terms of the loan are the terms of the loan. If a loan is sold across state lines, then the debt buyer must accept the terms under which it was written. If the existing loan rate would violate Usery laws in the buyer's state, then the buyer must offer the borrower the opportunity to refinance— at no cost or other disadvantage (such as restarting as a new full-term loan) to them—at a lower, valid rate in the buyer's state. If they can't do this, don't buy the loan.
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    By all means YES..... A loan was granted at a given percentage, and should remain so, regardless who is carrying the burden of collecting it. By NO means should the percentage be raised fr any reason unless it’s been refinanced for a different rate. 2*14*18.
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    This is an attempt by predatory lenders to get around state laws that protect hardworking Americans from being abused when they are vulnerable. Lenders should have to follow the laws of all the states they practice in, and not be able to get around them just because a loan originated in another state. Represent hardworking Americans and take a stand against predatory lenders.
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    NO! NO! NO! This bill would allow lenders to circumvent a state's usury and predatory lending laws. This is being sold in the guise of consumer protection when it is anything but.
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    Yes selling a loan should not change the terms for the borrower
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    A loan is a legal device which should NOT BE CHANGED WITHOUT THE OKAY BY BOTH PARTIES. If a bank wants to sell a loan to another institution which plans on changing the interest rate, they should not be allowed to do that.
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    Don't trust it
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    Those supporting this bill do not seem to have an understanding of what it does. If a lender originates a loan in an unregulated state at an exorbitant interest rate , this law will permit them to sell to a lender in a state that regulates payday lenders (right now more than half of US states prohibit payday loans or cap the rate at around 36% APR), and permit the new lender to keep the now illegal rate. It will give lenders in unregulated states a larger market in which to resell their usurious loans. While this does nothing to directly affect the rates paid by residents of the regulated state, it does affect the pool of available money. If you are a lender and can either make loans to the residents of your state at regulated, non-usurious rates OR buy loans from a state without those laws that promise ridiculously high returns, where do you think they will invest? This does absolutely NOTHING to help consumers, as borrowers in Alabama, for example, will still pay up to 456.25% interest on a two-week loan for $500! Remember, these are not banks, but predatory lenders, who want to nullify state laws that don't allow them to exploit the poor. This isn't about trying to protect the consumer. Lenders are already prohibited from raising rates (or changing any terms of the loan) when a loan is sold.
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    Shameful that this passed the House. This is a giant gift to payday lenders who are charging up to 390% interest on their loans! Over 20 states have rules to reduce these predatory loans interest rates and this bill will just wipe that off the books. Once again states rights are only important to Republicans if it's something that they want...
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    State consumer protection laws should be enforced.
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    It is a legally binding contract. The purchasing company should abide by the contract or they shouldn't buy the loan. Any legislation that allows an investor to change the interest rate on a fixed rate loan is just one more action, in which our government is placing the interests of big business and the 1% over We The People.
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    We need more consumer protection
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    No, if a bank issues a loan at a certain interest rate and then transfers the loan to another institution, the interest rate should always follow state laws. This bill just seems to allow predatory lending practices by allowing financial institutions to charge interest rates that are as high possible as long as the loan originated in a state where that interest rate is allowed.
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    Protect people, please!
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    Good lord aren’t they sucking enough money out of the pockets of students already? Stop penalizing people who want to improve their life by education. Protect people, not banks, not usury, not money changers. Protect the people!
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