Payday Loan Times

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Lobbying by Payday Lenders Finally Pays Off

Filed under: Regulation — Ryan Fiore at 7:06 pm on Thursday, April 2, 2009

Democrat Representative Luis Gutierrez says that while his bill does have some crucial protections for borrowers it will be 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’re very powerful. Their influence should not be underestimated,” says Gutierrez, who is the top Democrat on the Financial Services subcommittee.

Congress banned payday lending for military personnel back in 2006 by imposing a 36 percent interest-rate cap for them. Also another 15 states have either done the same or out right banned the loans. The reason why payday lending companies are against these interest rate caps is because it is the same to these lenders as banning the loans. Current payday loans charge over 400% interest rates on these loans which generally are repaid in one month. Gutierrez’s bill caps the annual interest rate for these payday loans to 391 percent, bans the lenders from allowing borrowers to repay the existing payday loan with another payday loan, and prevents payday lenders from suing borrowers or docking their wages to collect the debt.

However, many people do not believe that this will be enough. “We don’t believe that this is going to protect consumers. It would in fact condone the payday lending that can be extremely harmful to the people who can least afford it,” said Jean Ann Fox of the Consumer Federation of America.

To read more about the influence game: payday lenders thwart limits head on over to the Associated Press.

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