Payday Loans: Now US Congress Considers Meddling

[Mar 30, 2009.]

 

The last two of these blogs have detailed just some of the current efforts of state legislatures to regulate payday loans. Now, in addition to Georgia, Kentucky, South Carolina, Texas, Virginia, and others, the US Congress is tabling a bill for nationwide regulation.

Payday Loan Reform Act of 2009

The Payday Loan Reform Act of 2009 (H.R. 1214) will, if enacted, make it illegal for a lender to make more than one advance to a consumer at any one time. It will also cap interest rates and fees. U.S. Representative Luis V. Gutierrez (D-IL), Chairman of the Subcommittee on Financial Institutions, is supporting the new law and has promised a hearing to evaluate the legislation on April 2nd.

At the moment, some 23 states have chosen to provide little or no regulation of payday lenders. In a statement about the Payday Loan Reform Act earlier this month, Rep. Gutierrez pointed out: "Contrary to some initial consumer concerns, HR 1214 does not rollback any existing or current consumer protections, but rather encourages states to continue to serve their traditional role as the primary protector of consumer rights. The Bill would create a federal floor on which additional state consumer protections can be added."

Nothing is Enough

As the Huffington Post reports, none of this, has, of course, prevented lobby groups from pushing for even tougher regulation. On March 23rd, 10 such organizations got together to send a letter about payday loans to congressmen and congresswomen, urging them not to co-sponsor or support the legislation.

The letter claims that the rate and fees cap is inadequate, even though individual states will remain free to enact lower levels if they choose to do so.

Everything Is Too Much

Those on the other side of the argument are--just as predictably--unhappy with the Bill. Rep. Gutierrez's statement on payday loans quoted Jeff Kursman, who is a spokesperson for Check ‘n Go, the country's biggest payday lender, as saying: "House Bill 1214, as proposed, goes too far, infringing upon consumer choice, limiting consumer access to arbitration, and preempting and interfering with the fee structures established by the representatives of the citizenry in 34 states."

 

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.