House Preparing To Legalize Payday Loans With 391% APRs

[mkultra]

Does anyone know whats up with this?

A House subcommittee wants to legalize payday loans with interest rates of up to 391%. Lobbyists from the payday industry bought Congress' support by showering influential members, including Chairman Luiz Gutierrez, with campaign cash. The Congressman is now playing good cop, bad cop with the payday industry, which is pretending to oppose his generous gift of a bill.

this seems pretty odd if you ask me.


http://consumerist.com/5198880/house-preparing-to-legalize-payday-loans-with-391-aprs

[soothsayer]

1. There should be no loans above prime plus (make up a number---5?)

PERIOD. Why do we allow congress to screw us like this???? This is outrageous.

[xchrom]

2. why isn't this shit criminal?

:grr:

[Raineyb]

12. Because payday loans target poor people

And even a good number of Dems don't give a damn about them.

Payday loans and check cashing places are leeches which bleed poor people dry and needless to say only show up in certain neighborhoods.

Predatory lenders have been a problem in certain neighborhoods for decades. Look how long it took for them to get hip to these mortgages which were designed to get the borrower to default.

Regards

[LynneSin]

19. You don't see these kinds of business in the wealthier neighborhoods

but I can't go a mile without finding these on the street corner somewhere here in Wilmington. Included in these shame business are:

* Payday Loans
* Rent-to-Own business (A $50 DVD player will end up costing you over $100 thru their programs)
* Car Title Loans

I see some merit in the Payday loans if I found myself in a major pinch and had no other options whatsoever to find the money. But I would only use these as a super-duper-every-other-option-not-available solution.

I didn't include on the list but still find as a scam those tax places that guarentee your money the same day. IRS is pretty damn quick with giving out refunds and there are websites where you can do your taxes for free and see the money the next day. There are even services thru the YWCA and other neighborhood charity programs that will do your taxes for free and send them thru the computer so you can get a quick refund. And yet again, in the poor neighborhoods, they have these services out there scamming money with the ideal of "Get your Tax Dollars Today". Nothing personal, but I'd rather wait the week then to give up $100 of my tax dollars.

[Doremus]

A tenant above my shop gave up HALF of his refund -- $500!! -- to get his refund same day.

Shame on him for lacking the sense and shame on the chain store tax prep place for preying on silly people.

[LynneSin]

23. OMG - that's horrible

There is nothing I need that badly that I would sacrifice that much money for my refund.

I had one of those tax places right down the street from my house. I swore I was going to stand outside and offer people to do their taxes for them and convince them it was worth it to wait a week for their money. But they moved the office into a poorer neighborhood. (I'm also glad for the move because parking was a pain during tax season)

[Aloha Spirit]

3. Here's a related article--more background on Gutierrez/Payday loans from 2006 bill:

http://progressillinois.com/2009/4/6/gutierrez-payday-loan-ban-not-possible

Two years ago, Gutierrez co-sponsored a separate Payday Loan Reform Act (along with Rep. Jan Schakowsky and two others) that formally prohibited these financial products, but it never saw the light of day. So now, he's trying to reach a compromise, which might be a sensible approach. But if he thinks a 391 percent rate fee adequately protects the nation's vulnerable borrowers, even those who currently live in states with no laws, he's sorely mistaken.

and last Friday:

Rep. Luis Gutierrez, D-Ill., says his bill does have crucial protections for borrowers and represents the best deal he can manage in the face of the industry's aggressive lobbying. <...>

"While they may not be JP Morgan Chase or Bank of America, they've very powerful. Their influence should not be underestimated," Gutierrez, the top Democrat on the Financial Services subcommittee in charge of consumer credit issues, said in an interview this week.

[acmavm]

4. How'd they get so powerful? Maybe because these guys have

their hands out for 'support'?

[Aloha Spirit]

6. It is a really weird admission, isn't it. It almost feels like he's setting up a volley

for someone else to smack down.
Like, "oh the lobbies are too powerful, this is the best we can do."
Which could induce more congressional support to protect consumers from the lobbies.

Obviously, I'm an optimist, lol

[NC_Nurse]

5. "the best deal he can manage" WTF????

He can't stand up to aggressive lobbying? What's the problem, do they have guns?

[mkultra]

8. probably because his pockets are too full of gold.

[bluestateguy]

7. You are better off using a credit card than a payday loan

Credit card interest rates are hardly favorable, but compared to payday loans, they are much better.

[NYC_SKP]

9. People abused by payday loans have no credit, no credit cards.

They barely get by from paycheck to paycheck.

They are invisible to congress people, dem and republican, who think that middle class is $250,000/year.

People this poor have no representation in Washington, and their numbers are growing.

Even you, with your well-intended suggestion that credit cards are better, seem not to understand it.

I've been close to being willing to pay a large fee to get an advance on my paycheck, long ago as a working college student, but I never had to.

:donut:

[Blue_Roses]

21. so true...

so true, so true, so true...
guess you could say I speak from experience.

[Aloha Spirit]

10. Okay, here's another article that adds to the picture (from TheHill.com/April 1st))

http://thehill.com/business--lobby/check-cashing-lobby-spends-big-to-defeat-new-regulations-2009-04-01.html

Gutierrez’s bill seeks to impose a 15 percent rate, allow borrowers at least once every six months to extend their repayment terms, ban rollovers and provide better terms for consumers in 23 states that have higher rate caps under state law.

Jeff Kursman, spokesman for Check ’n Go, said the bill pre-empts state law and does nothing to protect the industry from state legislatures passing stiffer terms in the future. “We can’t support that in any way, shape or form,” he said.

Gutierrez: “If there is a tougher bill out there that can pass the House floor, I would readily support it.”

Consumer advocates, including the Center for Responsible Lending (CRL), Consumers Union, U.S. PIRG and the federation, favor a House bill offered by Rep. Jackie Speier (D-Calif.) and the Senate companion sponsored by Sen. Dick Durbin (D-Ill.). That bill would impose a 36 percent annual rate cap on all interest rates. According to a survey from CRL, three-quarters of those polled support a 36 percent cap. That bill is a non-starter with the industry.

“That would shut the industry down, period,” Burtzlaff said. Rep. Joe Baca (D-Calif.) is working on a third House bill, according to his spokesman.

[OHDEM]

13. So this industry will collapse if they can't rob poor people?

Give me a break! If 36% interest isn't enough for the current unethical THIEVES in this industry, then I'm sure there are plenty of greedy bastards right behind them to start new ones!

FYI - I canvassed in Ohio to pass a law to keep these places from charging this much interest. The commercials financed by payday lenders were INCREDIBLY full of bull and a lot of people we spoke to had no idea what the issue even involved. It passed here!

I can hardly believe how WEAK our elected officials are at consumer protection. Anyone involved in allowing this sort of legalization of robbing poor folks of their last pennies should be held accountable!

[OHDEM]

15. Info on the law in Ohio is here...

http://ballotpedia.org/wiki/index.php/Ohio_Payday_Loan_Referendum_(2008)

As you can see, it passed with flying colors thanks to hard work from unions and other volunteers that got out and passed out flyers and spoke to voters here. As far as I can see, not a single business has closed as a result of this law. I'll have to see if there are any articles about any closings....

[Aloha Spirit]

18. Wow... that's something that the House financial services subcommittee needs to know

in my opinion.

Time to get on them...
http://financialservices.house.gov/who.html

[Aloha Spirit]

16. I know, the hyperbole would be cute if their power over Congress weren't on display

... I'm really glad I read DU.
I would never have known about this developing scandal otherwise.

[NC_Nurse]

17. Then shut them down. Good riddance!

[NYC_SKP]

11. Somewhat misleading first sentence. Those rates are legal right NOW.

"A House subcommittee wants to legalize payday loans with interest rates of up to 391%.

Those interest rates are legal NOW. They don't need to be "legalized".

From another article at consumerist.com:

For about 30 years, there has been effectively no limit on the interest rates lenders can charge. This means some loans—especially payday loans, tax refund anticipation loans, overdraft protection loans, and car title loans—can have effective interest rates as high as 3,500%.

A new bill proposed by Senator Richard Durbin (D-Ill.) would cap the interest rate on consumer credit transactions at 36%. Is it time for the government to reign in the lending market? Yes, it is.

Here are what some of those ridiculously-high interest rates look like in practice:

* A 3,500% APR on a bank overdraft protection loan means that if you overdraw your account by one cent, you will be charged $35.
* A 400% APR on a payday loan means that if you take out a $200 loan, you will be charged about $34 for the two-week loan.
* A 30% rate on a $1,000 credit card balance will work out to about $170 if you pay off the balance in one year (with payments of about $95/month).


http://consumerist.com/5168071/national-usury-limit-could-reduce-number-of-people-paying-debt-until-they-die

:patriot:

:patriot:

[mkultra]

14. military payday loans are capped

http://consumerist.com/347293/payday-lenders-cant-afford-to-lend-you-money-at-only-36

[NYC_SKP]

20. And, that link reveals the dilemma:

"At 36% APR, the total fee charged on a $100, two-week advance would be $1.38. We cannot cover the cost of originating the a loan, let alone meet employee payroll and benefits and other fixed business expenses, at this rate."

I hate that people need to get advances and that these rates are so high, there needs to be protection.

But I wonder, what would be a reasonable price to charge someone for advancing them $100 for two weeks?
If I answered, "5 bucks", that would equate to 130% annually, and would sound absurd.

I don't think I'd be able to run a business, pay rent, utilities, etc. at $5/loan, much less $1.38.

:shrug:

[mkultra]

25. perhaps this business model is not viable then

higher interest rates might be fine if rollovers of unpaid interest at the same business cluster where not permissible.

[cwcwmack]

22. now that's

enough to PISS ya off.

[PurityOfEssence]

24. And people wonder why some of us still like John Edwards

This would NEVER be given the slightest consideration under his administration; he would howl mightily against Congress at the very mention of it. Not only did he, from the very beginning, rail against "predatory lending", he used the name of this company as a specific example.

Where are all the voices that insisted that Obama would change his stripes once he finished lying to the Republicans and got elected? It seems that they're either stilled, skewing his moves as somehow populist or sniping that he never claimed to be other than what he is right now.

ANY consideration of this grotesque usury shows allegiance to big money. If President Obama uses his standard tack of saying that this is Congress and Congress has to be left to its devices, then he's just playing games again, like he does about prosecution of the Bush Administration. (A quick note here: I don't think he politically CAN prosecute the Bushies, but playing both sides of the road on the issue is greasy.)

He needs to speak out against this now.

[AtomicKitten]

26. You seem very trusting of Edwards and oblivious to history.

I'm still mindful of Edwards leading the charge into Iraq. He had such a hard-on for invading Iraq that the Bush White House posted his passionate Op-Ed to that end on the WH website. Yikes.

Edwards' metamorphosis from DLC warmonger into what you describe doesn't hold water. Hedge fund ring a bell? He was running for president. Period.

You chastise people here for what you call "blind allegiance" to Obama when you are doing the exact same thing with your edited version of John Edwards. I like the man but your hyperbole (+ Edwards and - Obama) is sometimes ridiculous.

[OHDEM]

27. A recent study of the cap on payday lenders in Ohio...

Link is here ....http://www.thehousingcenter.org/New-Research/Payday-Lenders-Operating-in-81-Ohio-Counties-Charging-Up-to-680-Interest.html

Click on: The New Face of Payday Lending in Ohio

In this report you'll find the sad truth - thieves like this (much like the Bush admin really) when cornered with rules they don't like, will simply change the game. :( How do we protect consumers with unethical folks like this preying on the poorest among us???