#This draft law seeks to ensure fairness in lending practices by capping interest rates for private loans at 5% and government loans at 1%, with provisions for enforcement and penalties to encourage compliance.
Section 1: Title and Purpose
This Act shall be known as the Fair Loan Interest Rate Act. Its purpose is to promote fair lending practices by setting maximum allowable interest rates on loans, protecting individuals and entities from excessive interest rates, and ensuring that government-issued loans remain affordable.
Section 2: Definitions
- Loan: Any lending arrangement in which a lender provides funds to a borrower with the expectation of repayment, with or without interest.
- Interest Rate: The percentage charged by a lender on the principal amount of a loan, expressed as an annual percentage rate (APR).
- Government-Issued Loan: Any loan provided or backed directly by federal, state, or local government entities.
Section 3: Maximum Interest Rate for Private Loans
- All private lenders, including financial institutions, credit card companies, payday lenders, and other private or corporate entities, shall be prohibited from charging an interest rate exceeding 5% per annum on any loan.
- The interest rate cap shall apply to both fixed and variable interest rate loans, as well as all fees and charges that may increase the effective annual interest rate beyond 5%.
Section 4: Maximum Interest Rate for Government-Issued Loans
- For loans issued or guaranteed by any government entity, the maximum allowable interest rate shall not exceed 1% per annum.
- This cap includes all government loans for educational, housing, small business, infrastructure, and other purposes, provided directly by federal, state, or local government entities.
Section 5: Penalties for Violation
- Any lender found in violation of this Act shall be subject to a penalty not exceeding three times the amount of interest charged above the legally allowed rate, in addition to full restitution of any excess interest collected.
- Repeated violations by a lender may lead to suspension or revocation of their license to operate.
Section 6: Enforcement and Regulation
- The Federal Reserve and relevant state banking authorities shall be responsible for enforcing compliance with this Act and may issue regulations as necessary to implement and oversee adherence to its provisions.
- The Attorney General is authorized to investigate complaints of excessive interest rates and take enforcement actions as needed.
Section 7: Exemptions
- Loans issued prior to the enactment of this Act are exempt; however, any refinancing, renewal, or extension of such loans must comply with the provisions of this Act.
- Loans that are deemed essential for high-risk investment projects may be exempt from the rate cap with specific approval from the Federal Reserve, provided they meet conditions that protect borrower interests.
Section 8: Effective Date
- This Act shall take effect on the first day of the fiscal year following its enactment.