Final answer:
The authority to cap interest rates for payday loans in the United States is given to individual states, not the federal government or the CFPB. The correct answer is option b.
Step-by-step explanation:
The authority to cap the interest rate for payday loans varies across different jurisdictions. In the United States, this authority is not uniform and is instead given to individual states. While the Truth in Lending Act provides a federal framework for the disclosure of terms and costs of consumer credit, it does not impose a cap on interest rates. Similarly, the Consumer Financial Protection Bureau (CFPB), established in 2011, also does not set interest rate caps on payday loans.
Many states have enacted usury laws, which provide price ceilings on the interest rates that lenders can charge. These laws set maximum allowable interest rates, effectively creating a price ceiling. However, it is important to note that in many instances, the caps set by these usury laws are above the typical market interest rates, indicating these ceilings are often nonbinding unless the market interest rates rise significantly. Ultimately, the setting of interest rate caps in the context of payday loans is left to the discretion of state governments, and they can differ vastly from one state to another.
Since the correct answer is that the authority to cap interest rates for payday loans is given to individual states, the correct option is (b) is given to individual states.