Senator Dick Durbin is attempting to limit the credit options of millions of Americans. I for one am outraged, and you should be too. The proposed “Protecting Consumers from Unreasonable Credit Rates Act” will put a federal interest rate cap on all loans at 36% APR. What does this mean to you and me? Well, nothing, unless you have ever needed short-term credit like a cash advance.

Credit is a simple thing to understand. For whatever reason, it is almost completely avoided in schools and practically never taught at all. Our liberal education system feels its more important for kids to understand arts, poetry and other useless skills and information. So if you, like me, didn’t learn about credit in school and had to learn it on your own, or still need to learn it, here’s a summary.

APR stands for Annual Percentage Rate. When you receive credit, you are given a certain amount of money from a lender. That lender then charges you to borrow the money. Of course, it would defeat the purpose if the money was charge up front. So payment plans are available in which borrowers pay back what they owe in small steps. The APR determines how much the fee is going to be. The term is how long the loan will be out, or the time you have to pay it back.

Now the big thing here is the term. APR doesn’t mean much if the term is one day. You have to know how long the term will be. Hence the phrase ‘short-term credit.’ This means credit extended for a very short period of time.

Short-term credit cannot survive on 36% APR. When you do the math, this means that 3% of your loan is collected as a fee per month. Since short-term credit is typically two weeks or so, the interest collected would be 1.5% of the loan amount.

In other words, if you borrow $500 for two weeks, at 36% APR you only have to pay back $507.50 at the end of your loan term. That’s practically free money. You hardly have to pay the lender anything at all to borrow their money for a short period of time.

That’s why Durbin’s bill makes no sense. It effectively shuts down any and all short-term credit, because no one will be able to make money with it. So what happens if you need to pay rent on Monday but don’t get paid until Friday? What happens if your car breaks down and you don’t get paid until next week? What happens when your phone bill is due a week before your next paycheck?

I will tell you what happens. A) Take the late fee on the bills B) Take the bounced check fee C) Take the overdraft fee or D) Cry. You may be surprised to know that all four will happen. Try paying your rent with a bad check. When it bounces, you get that fee, you get the late fee, and if you use a card, replace the bounced check fee with an overdraft fee, the worst fee of all.

So be sure to write to Dick Durbin and thank him for screwing millions of Americans in need of payday loans. Kiss your short-term credit options good bye if this joke of a bill passes.