Senators Crack Down on Payday Loan Industry

[Jun 14, 2008.]

 

A pair of U.S. Senators is issuing a stern warning to the payday loan industry.  Senators Charles Grassley, a Republican from Iowa, and Charles Schumer, a Democrat from New York, have issued a letter to payday lenders, telling them they should not be offering “instant rebates that could bilk Americans out of huge portions of their rebate checks.”

Grassley and Schumer stated, “We are determined that members of your industries not take any steps to publicize or otherwise encourage working families, veterans, or seniors to take a loan or other credit arrangement based on the rebate checks approved by Congress.”

The Senators want to protect families from loans with high interest rates and hidden fees.  The loans would be extended in anticipation of a family’s rebate check.

As Senator Grassley stated, “These rebates are meant to put money in people’s hands, not increase their debt.  Taxpayers should understand that refund anticipation loans are just that—loans.  As loans, they can carry very high interest charges that make them a very bad deal for the taxpayer.”

Meanwhile, payday loans companies are reacting with anger to the Senators’ letter.

“The letter from Sens. Grassley and Schumer to payday lending companies was unnecessary and demonstrated a misunderstanding of the payday advance service.  Payday lenders are not in the business of making tax refund anticipation loans or loans based solely on potential future income.  Payday lenders to do not offer the type of loan detailed in the letter,” the Community Financial Services Association of America said in a prepared statement.  The association represents payday lenders.

Similarly, H & R Block states that it was not considering extending loans to families in anticipation of the federal rebates.

“We did not consider offering a loan based on the rebates, but will be helping people claim the rebate by offering $35 professional tax preparation and do-it-yourself options at no or low cost for those who would not normally need to file a tax return,” company officials said in a written statemen