Federal legislation threatens future of pawn shops

[The Straight Story]

Federal legislation threatens future of pawn shops

While local pawn shops have been thriving in these tough economic times, some owners in Oklahoma are wary due to legislation that would change the future for owners and consumers. U.S. Senate Bill 500, "Protecting Consumers from Unreasonable Credit Rates Act of 2009," would cap consumer interest rates at 36 percent annually.

Consumer advocates say it's overdue. Jeff Schuman, executive director of the Deep Fork Community Action Agency in Okmulgee, said many families have to hit pawn shops, credit cards, payday loan businesses, and signature loan businesses just to make ends meet. "The rates all these credit sources charge are excessive," Schuman said. "I think the credit industry has been an old-time pirate, whatever-we-can-get kind of thing and it's not fair to people.

"Many, many low-income people borrow in good faith. So giving them a reasonable product with a reasonable rate is not too much to ask." Schuman was among more than 100 representatives of national and state groups who signed a supportive letter March 2 to the bill's author, U.S. Sen. Dick Durbin, D-Ill. Groups ranging from the Consumers Union to the NAACP and the National Fair Housing Alliance wrote that the legislation would address interest rates that sometimes reach 400 percent on payday loans and triple digits on credit cards.

Street argues that it would ultimately hurt those who can't borrow from other lenders. He said someone can borrow $100 from a pawn shop for 30 days and it would cost them about $15. Compare that to a returned check charge of $35, or a $29 late payment for a credit card, and the consumer is paying more than he would at the pawn shop.

Mitch Plumlee, owner of Express Cash Pawn, said the bill would deal his two stores a fatal blow."I'd go broke. It would be a tremendous cut in our business profit," Plumlee said. "I promise I'll be selling out lickety-split."

http://www.ktbs.com/news/Federal-legislation-threatens-future-of-pawn-shops--29221/

[county worker]

1. cap consumer interest rates at 36 percent annually? WTF?

What kind of help is that? How about capping at 12%? Consumer credit should never be that high!

[MercutioATC]

3. You're falling for the rhetoric of the anti-payday-loan people.

A 12% annual rate for short-term loans? Preposterous.


A 12% annual rate (including fees) on a $200, 2-week loan would result in 92 cents of interest/fees.

The only way they get to claim "300% interest" is by extrapolating the interest rate and fees of a 2-week loan over an entire year.


It's hype.

[Liberal Veteran]

5. Payday loans are loan sharks with a license

[MercutioATC]

6. Opinion noted, but would you care to actually address the facts?

If you find that I've miscalculated, please let me know.

Do you believe that a 12% annual rate would be reasonable for 2-week loans?

[Liberal Veteran]

7. Having contributed to three "extractions" from payday loan hell in the last year.

I have a somewhat biased opinion of these places. I have had to help three people escape the withered diseased clutching hand of payday loans in the last year.

You may be right that my knowledge in these places are somewhat lacking, but the peripheral experiences I have had with them has never been pleasant.

[stillcool]

2. We better nix that idea then!

the credit card companies are raping Americans, but we shouldn't cap the rates because the pawn shop will go out of business.

[ddeclue]

4. Umm did you forget this?

:sarcasm:

Like I feel sorry for the loan sharkers of the world that they are gonna only get ONE pint of my blood now???? Personally I believe that no secured loan should be allowed at more than 5% about prime and no unsecured loan should be allowed above 10% over prime. The card sharks should be the next guys they go after - the credit card companies are greedy bastards who are screwing over Americans and keeping them in debt for their whole lives.

Doug D.