In the push for these customers, banks often have an advantage over payday loan companies and other storefront lenders because, even though banks are regulated, they typically are not subject to interest rate limits on payday loans and other alternative products.
In Utah, home to WebBank, which originates loans for Lending Club and Prosper, there are no interest rate limits.
Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%.
Consumer loans above $2,500 have no interest rate limit.
The Times somberly explained, "The banking industry, which had some heavyweight representatives monitoring the vote, warned that an interest rate limit could cause a sour reaction in the financial markets".
Second, the floor is probably a soft one because the eventual prospect of higher interest rates limits the potential profit from a large investment in cash management.
Laws vary by state in reference to interest rates limits and compounding of interest.
China had already experienced a dangerous bubble in its residential housing market, but in that case the government had succeeded in engineering a relatively soft landing by raising interest rates, limiting the number of residences one owner could buy in such cities as Beijing and Shanghai and levying a new tax.
"If the writer's proprietary lease has such an interest-rate limit," Mr. Shmulewitz said, "then the late charge here would appear to run afoul of such limit and be unenforceable, since a late charge of 12 percent of one month's arrearage would translate into 144 percent per year".
High debt leaves countries exposed to interest rate shocks, limits their capacity to respond to future shocks, and reduces long-term growth potential.
In 2008, a House bill to ban retroactive interest rate hikes, limit abusive fees and rein in deceptive marketing techniques passed by an overwhelming margin, but the banking lobby successfully prevented a similar measure from coming to a vote in the Senate.
