Congress should protect all from payday loans

From the Arizona Daily Star (6/26/09)

Congress is finally attempting to do for the general public what it did three years ago for military members — protect them from predatory payday lending.

The Protecting Consumers from Unreasonable Credit Rates Act of 2009, sponsored by U.S. Rep. Jackie Speier, D-Calif., and co-sponsored by Southern Arizona Democrat Raúl Grijalva, would cap fees and interest rates on all consumer loans at 36 percent. There’s a companion measure in the Senate sponsored by Sen. Dick Durbin, D-Ill.

Congress passed a similar bill, later signed by President Bush, that applied to members of the armed forces in December 2006. Lawmakers created that measure, in part, because it found that many military members were becoming possible security risks due to their payday-loan debts.

We have argued on this page previously that what’s good for the nation’s military members should also be good for the rest of society.

We urge Arizona’s congressional delegation to get behind this measure so that consumers aren’t saddled with extremely expensive loans that have interest rates approaching 400 percent annually. Payday loans often make borrowers’ financial situations worse, not better.
State Sen. Debbie McCune Davis, D-Phoenix, who led the 2008 effort to defeat an initiative that would have permanently allowed payday lending in Arizona, called on federal lawmakers to pass the Speier bill.

“Arizonans made our verdict clear. We do not believe any lender should be allowed to charge triple-digit interest rates,” McCune Davis said in a press release earlier this month. “Now that Congress is looking at this issue, I encourage Arizonans to make sure our congressional delegation hears from all of us: ‘Support a 36 percent cap.’ ”

As a side note, the November defeat of the payday lenders’ Proposition 200 at the ballot has made state legislators wary of supporting any measure favorable to the lenders. It appears there’s no danger lurking for consumers in the final days of the legislative session.

Opponents of payday loans went to a Capitol Hill hearing earlier this month armed with a new study that showed predatory lenders overwhelmingly locate in African-American and Latino neighborhoods.

The study by the Durham, N.C.-based Center for Responsible Lending found that:
Payday lenders are nearly eight times as concentrated in neighborhoods with the largest shares of African-Americans and Latinos as compared to white neighborhoods, draining nearly $247 million in fees per year from these communities.

Even after controlling for income and a variety of other factors, payday lenders are 2.4 times more concentrated in African-American and Latino communities.

These findings provide more ammunition for activists who say payday lenders routinely prey on people who are financially illiterate or who don’t have access to other credit options.

Congress acted responsibly in 2006 by safeguarding military members from payday lenders. Now it’s time to extend that same protection to all American consumers.

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