Markets, not governments, should determine interest rates. Politicians are free to cajole, but not to interfere. Markets are often messy, but they are very adaptable and generally get things right in the end; and where interest rates are concerned, placing an artificial cap on interest rates for consumer debt has the unintended effect of blocking some people out of the credit market altogether.
That’s precisely what the state of Virginia is contemplating. Senate Bill 1252, currently making its way through the Virginia Legislature, would cap consumer interest at 12 percent.
A. Except as otherwise permitted by law, no contract shall be made for the payment of interest on a loan at a rate that exceeds 12 percent per year.
There are exceptions:
B. Laws that permit payment of interest at a rate that exceeds 12 percent per year are set…
