Payday Loans News Roundup: Legislators' Pawns

[Jun 5, 2009.]

 

There are two payday loans bills in committee on Capitol Hill. One of them would provide some extra protections for borrowers. The other would eliminate payday loans - and access to most other short-term credit.

Payday Loans Reform Act of 2009

The proposed Payday Loans Reform Act of 2009 is the more famous of the two bills currently in committee. The house initiative, sponsored by Rep. Luis Gutierrez (D-IL), has been attacked both by consumer groups who claim that it is insufficiently tough, and by some in the payday loans industry who claim that it is too regulatory.

For example, in a statement issued to Reuters, D. Lynn DeVault, president of one of the payday loans' industry's most influential bodies, the Community Financial Services Association of America (CFSA) said: "…this bill goes too far, most notably in establishing a national fee cap for payday loans, one small segment of the short-term credit market. We're aware of no other short-term credit product that has a national fee cap, certainly not bank and credit union NSF and overdraft protection fees or credit card late fees."

Payday Loans Killer Act

The other payday loans Bill-on-the-Hill is Senate Bill S500, formally known as a bill: To amend the Truth in Lending Act to establish a national usury rate for consumer credit transactions. It has the more popular title of the Protecting Consumers from Unreasonable Credit Rates Act of 2009.

This says: "…no creditor may make an extension of credit to a consumer with respect to which the fee and interest rate… exceeds 36 percent."

As this blog has previously pointed out, the leading anti-payday loans lobby group, the Center for Responsible Lending, has admitted that a 36 percent rate cap will kill the industry. It posted a six-minute video on one of its payday loans websites in which the narrator says: "Arizona will be the 16th state to eliminate payday lending by enforcing an interest rate cap of around 36 percent."

Not Just Payday Loans Under Threat

Yesterday, the Macon County News reported the remarks of local businessman, Danny Green, who was talking about how the Protecting Consumers from Unreasonable Credit Rates Act of 2009 would affect not payday loans, but about his own pawn broking enterprise.

He told the newspaper: "It’ll put us out of business and the employees will be out of a job. It will hurt the community. We help people in ways that no one else will. You can’t walk in a bank and tell them you need $5, or $10 or $50. They’d laugh at you. But if you have anything of value I can help you out. It might be a mother needing to buy a pack of diapers or a man who wants a beer."

Anti Payday Loans Campaigners Make Slow Progress

Two weeks ago, this blog reported the Center for Responsible Lending's launched of a new payday loans web site, where it plans to post 400 of the worst hard luck stories. 



Rebuild.org said "The site has only been up for a short time, so it would be unfair to draw any conclusions from the fact that it has--at the time of writing--so far attracted only three stories."

As of today, the total number of stories has now reached… er, it's still only three. Stand by, no doubt, for an avalanche.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.