Affordable Auto Loan Protection Act

Cap Auto Loan Rates at 14% & Protect Against Quick Repos!

This bill caps interest on cars under $30K at 14%, adds 120-day grace before repossession for job loss/family hardship, & lowers existing rates in phases. Helps families save $100s/month, keep wheels on the road, & avoid debt traps—boosting job access & financial freedom.

 

 

# H.R. ____

 

# A BILL

 

To establish comprehensive protections for consumer automobile loans, including maximum annual percentage rates, repossession grace periods, and retroactive interest rate adjustments for vehicles with a purchase price of less than $30,000, and for other purposes.

 

**Be it enacted by the House of Representatives and the Senate of the United States of America in Congress assembled,**

 

## SECTION 1. SHORT TITLE.

 

This Act may be cited as the "Affordable Auto Loan Protection Act of 2025".

 

## SECTION 2. FINDINGS.

 

Congress finds the following:

 

(1) Access to affordable transportation is essential for economic mobility, employment, and daily living in the United States.

 

(2) High interest rates on consumer automobile loans disproportionately burden low- and moderate-income households, particularly for vehicles priced under $30,000, which represent the majority of new and used car purchases for middle-class families.

 

(3) Recent economic data indicates that average annual percentage rates (APRs) on sub-$30,000 auto loans have exceeded 10 percent in many markets, with subprime borrowers facing rates above 15 percent, leading to increased financial strain, defaults, and repossessions.

 

(4) Millions of existing auto loans originated at rates exceeding 14 percent continue to trap borrowers in unaffordable debt, with over $1.5 trillion in outstanding auto debt as of 2025, necessitating retroactive relief to provide equitable access to the protections established herein.

 

(5) Premature repossession of vehicles exacerbates financial distress, disrupts employment and housing searches, and perpetuates cycles of poverty, with data showing that over 1.5 million vehicles were repossessed in 2024 alone, disproportionately affecting vulnerable households.

 

(6) Establishing a federal cap on interest rates at 14 percent for such loans, along with a mandatory 120-day grace period from the last full payment before repossession and phased reductions for existing loans, will promote fair lending practices, reduce predatory financing, and align with consumer protection principles under the Truth in Lending Act (15 U.S.C. 1601 et seq.).

 

(7) This measure will not unduly burden responsible lenders, as it sets the cap at 14 percent, a rate that allows for reasonable risk pricing while protecting consumers and providing essential breathing room during hardships such as job loss, relocation, or family bereavement; phased adjustments for existing loans ensure orderly implementation.

 

## SECTION 3. DEFINITIONS.

 

In this Act:

 

(1) **APR**.—The term "APR" has the meaning given the term "annual percentage rate" in section 107(d) of the Truth in Lending Act (15 U.S.C. 1606(d)).

 

(2) **CONSUMER AUTOMOBILE LOAN**.—The term "consumer automobile loan" means a loan or line of credit, other than an open-end credit plan, extended to an individual primarily for personal, family, or household purposes, and secured by a lien on a passenger motor vehicle (as defined in section 32901(a)(16) of title 49, United States Code) that is intended primarily for use on public roads.

 

(3) **COVERED VEHICLE**.—The term "covered vehicle" means a new or used passenger motor vehicle with a purchase price, including taxes and fees but excluding any manufacturer incentives or rebates, of less than $30,000.

 

(4) **CREDITOR**.—The term "creditor" has the meaning given that term in section 103(g) of the Truth in Lending Act (15 U.S.C. 1602(g)).

 

(5) **FULL PAYMENT**.—The term "full payment" means a scheduled principal and interest payment received by the creditor on or before the due date without partial application or exception.

 

(6) **GRACE PERIOD**.—The term "grace period" means the 120-day period beginning on the date of the borrower's last full payment under the loan.

 

(7) **HARDSHIP EVENT**.—The term "hardship event" means job loss, relocation for new housing, or the recent death of a close family member (defined as a spouse, domestic partner, child, parent, sibling, or grandparent).

 

## SECTION 4. MAXIMUM ANNUAL PERCENTAGE RATE FOR CERTAIN CONSUMER AUTOMOBILE LOANS.

 

(a) **IN GENERAL.**—No creditor may impose a finance charge on a consumer automobile loan secured by a covered vehicle that results in an APR exceeding 14 percent.

 

(b) **EXCEPTIONS.**—

 

(1) **COMMERCIAL PURPOSES.**—Subsection (a) shall not apply to any extension of credit primarily for business, commercial, or agricultural purposes.

 

(2) **GOVERNMENT LENDING.**—Subsection (a) shall not apply to credit extended by any agency or instrumentality of the United States, a State, or a political subdivision of a State.

 

(c) **RULE OF CONSTRUCTION.**—Nothing in this section shall be construed to limit the authority of any State to establish, maintain, or enforce any law or regulation relating to interest rates on consumer automobile loans that is more protective of consumers than the requirements of this section.

 

## SECTION 5. REPOSSESSION PROTECTIONS FOR COVERED CONSUMER AUTOMOBILE LOANS.

 

(a) **IN GENERAL.**—No creditor or assignee of a creditor may take possession of a covered vehicle securing a consumer automobile loan until at least 120 days have elapsed from the date of the borrower's last full payment under the loan.

 

(b) **TRIGGERING EVENTS AND PURPOSE.**—The grace period under subsection (a) shall apply upon any default under the loan terms and is intended to provide the borrower a reasonable opportunity to address hardships, including but not limited to hardship events.

 

(c) **NOTICE REQUIREMENT.**—Prior to initiating any repossession action after the grace period, the creditor must provide the borrower with written notice, sent via certified mail or electronic means with read receipt, at least 30 days in advance. Such notice shall include—

 

(1) a statement of the amount past due and the date of the last full payment;

 

(2) information on the borrower's rights under this section and available hardship assistance programs;

 

(3) contact details for free credit counseling services approved by the Bureau of Consumer Financial Protection; and

 

(4) a toll-free number for the creditor's loss mitigation department.

 

(d) **EXCEPTIONS.**—

 

(1) **FRAUD OR THEFT.**—Subsection (a) shall not apply if the creditor has a reasonable belief, supported by evidence, that the vehicle has been stolen, used in fraudulent activity, or abandoned.

 

(2) **COURT ORDER.**—Subsection (a) shall not apply if repossession is authorized by a court order following a judicial foreclosure proceeding.

 

(3) **VOLUNTARY SURRENDER.**—Subsection (a) shall not apply to voluntary repossession agreed to in writing by the borrower.

 

(e) **RULE OF CONSTRUCTION.**—Nothing in this section shall be construed to limit the authority of any State to establish, maintain, or enforce any law or regulation providing longer grace periods or additional borrower protections for repossession actions.

 

(f) **APPLICABILITY.**—This section shall apply to all consumer automobile loans originated on or after the effective date of this Act, and to existing loans upon refinancing or modification after such date.

 

## SECTION 6. RETROACTIVE INTEREST RATE ADJUSTMENTS FOR EXISTING CONSUMER AUTOMOBILE LOANS.

 

(a) **IN GENERAL.**—The maximum annual percentage rate protections under section 4(a) shall apply to consumer automobile loans originated prior to the effective date of this Act if the secured vehicle qualifies as a covered vehicle under section 3(3) as of such effective date.

 

(b) **PHASED RATE ADJUSTMENT REQUIREMENT.**—

 

(1) **INITIAL REDUCTION.**—Within 90 days of the effective date of this Act, the creditor shall reduce the APR on a qualifying existing loan to no more than 75 percent of the difference between the original APR and 14 percent (i.e., a partial adjustment toward the 14 percent cap).

 

(2) **FULL COMPLIANCE.**—The creditor shall achieve full compliance with the 14 percent APR cap under section 4(a) no later than one year after such effective date, with any remaining reduction applied in equal increments every 3 months over the intervening period, or all at once at the creditor's discretion.

 

(3) **NOTICE AND IMPLEMENTATION.**—Creditors shall notify affected borrowers in writing within 30 days of the effective date, detailing the adjustment schedule, new payment amounts, and any refund for overpaid interest accrued since origination. Adjusted payments shall be reflected in the borrower's next billing cycle following each reduction.

 

(c) **QUALIFICATION VERIFICATION.**—For existing loans, qualification under subsections (a) and (b) shall be determined using the purchase price at origination (adjusted for any documented refinancings) and current vehicle records. Borrowers may submit evidence of eligibility to the creditor or the Bureau of Consumer Financial Protection if disputed.

 

(d) **EXCEPTIONS.**—

 

(1) **NON-QUALIFYING LOANS.**—This section shall not apply to existing loans secured by vehicles that do not meet the covered vehicle criteria under section 3(3).

 

(2) **LENDER INSOLVENCY.**—Adjustments shall be deferred if the creditor is subject to receivership or bankruptcy proceedings, but shall resume upon resolution.

 

(e) **REMEDIES FOR NONCOMPLIANCE.**—Failure to comply with the adjustment requirements under subsection (b) shall constitute a violation of this Act, subject to the enforcement provisions under section 7, including mandatory refunds of excess interest at 150 percent of the overcharge and potential loan rescission.

 

## SECTION 7. ENFORCEMENT.

 

(a) **CIVIL ENFORCEMENT.**—

 

(1) **AUTHORITY OF BUREAU.**—The Bureau of Consumer Financial Protection shall have authority under section 105(a) of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5561(a)) to enforce this Act with respect to any person subject to its jurisdiction.

 

(2) **FEDERAL TRADE COMMISSION.**—The Federal Trade Commission shall enforce this Act with respect to any person subject to the Federal Trade Commission Act (15 U.S.C. 41 et seq.), consistent with section 1115 of such Act (15 U.S.C. 45m).

 

(b) **PRIVATE RIGHT OF ACTION.**—Any person aggrieved by a violation of sections 4, 5, or 6 may bring a civil action in an appropriate district court of the United States for actual damages, statutory damages of not less than $500 or greater than $5,000 per violation, punitive damages, equitable relief, and reasonable attorney's fees and costs.

 

(c) **REMEDIES.**—In addition to any other remedies available under law, a court may order rescission of the loan, refund of excess finance charges, termination of any security interest created by the loan, recovery of the vehicle if repossessed in violation of section 5, and mandatory phased rate reductions under section 6(b).

 

## SECTION 8. DISCLOSURES.

 

Creditors extending consumer automobile loans subject to section 4 shall include in the disclosures required under section 128 of the Truth in Lending Act (15 U.S.C. 1638) a clear and conspicuous statement that the APR is subject to the maximum rate established under this Act, as well as the repossession grace period protections under section 5 and, for existing loans, the retroactive adjustment rights under section 6.

 

## SECTION 9. REGULATIONS.

 

(a) **IN GENERAL.**—The Bureau of Consumer Financial Protection shall issue final regulations to implement this Act not later than 180 days after the date of enactment of this Act.

 

(b) **CONTENTS.**—Such regulations shall include—

 

(1) guidance on determining the purchase price of a covered vehicle;

 

(2) procedures for calculating compliance with the APR cap;

 

(3) guidance on verifying borrower hardships for exceptions under section 5(d);

 

(4) standardized notice forms for the requirements under section 5(c);

 

(5) procedures for tracking compliance with the 120-day grace period;

 

(6) procedures for identifying and verifying qualifying existing loans under section 6;

 

(7) formulas for calculating phased APR reductions and interest refunds under section 6(b); and

 

(8) model notices for borrower notifications required under section 6(b)(3).

 

## SECTION 10. EFFECTIVE DATE.

 

This Act shall take effect 180 days after the date of enactment.