Support Payday Loan Reform Legislation

RI House Committee on Corporations is looking at legislation to reduce payday-loan interest from 260 to 36 percent.

The House Committee on Corporations is considering legislation to reduce the legal rate of interest on payday loans from the unconscionable APR of 260% to 36%.

The bill (H.R. 7257) has been co-sponsored by 50 of 75 representatives. The senate bill (S.B. 2307) is co-sponsored by 26 of 38 senators. Because of the likelihood of passage, lobbyists for payday lenders are trying to make sure that the bills never get a vote in either chamber.

Payday loans are marketed as short term solutions to a cash shortage. In reality, borrowers get trapped in a cycle of borrowing at unconscionable interest rates.

The family that couldn’t afford to pay expenses before obtaining a payday loan now has to shoulder the burden of triple-digit interest on a low risk loan as well. When a loan is repaid, the borrower generally needs to obtain a new loan to pay living expenses until the next pay period.

Once the cycle begins, the interest paid consumes an increasing portion of the borrower’s income as the size of the loans obtained increases over time. The payday loan becomes a long-term obligation where the interest paid far exceeds the amount of the loan obtained. The financial impact of obtaining a payday loan for the full amount of a paycheck is the equivalent of a taking a voluntary 10 percent pay cut at a time when you can least afford it.

Rhode Island is the only New England state which allows payday lenders to charge an APR in excess of 36%. The payday loan exception to Rhode Island’s usury laws was enacted in 2001.

In 2007, Congress banned payday lending to military personnel at rates in excess of 36%, finding that the threat presented to military families by payday loans was a threat to national security. Where high-interest payday loans have been abolished, the availability of small consumer loans at 36% has increased substantially.

Despite these facts, the lobbyists sent by the payday lending industry are trying to convince the House Committee on Corporations that Rhode Island’s citizens could not survive without payday loans. In fact, Rhode Islanders have survived for decades without high-interest payday loans just as military families and the residents of every other New England state do today.

Given these facts, it is a moral imperative that the House and Senate Committees on Corporations recommend passage of payday loan reform.

AFSC-SENE; Capital Good Fund; CCRS, Black Political Action Committee of RI; City of Providence; CommunityWorks RI; Dorcas Place; Housing Action Coalition RI; Housing Network of RI; Housing Resources Commission; Genesis Center; Gloria Dei Lutheran Church; Jewish Federation of RI; NAACP, Providence Branch; Macremi; Ministry of Justice, MMM; NeighborWorks Blackstone River Valley; Northern RI Community Services; Progresso Latino; Providence En Espanol; St. Michael’s Church, Providence; St. Paul’s Church, Wickford; Univocal Legislative Minority Advisory Coalition; West Elmwood Development Corp.; Rep. Grace Diaz, Dist. 11; Rep. Frank Ferri, Dist. 22; Sen. Harold Metts, Dist. 6; Sen. Juan Pichardo, Dist. 2; Steven J. Boyajian; Reza Clifton; Janetti Conway; Shane Culliton; Rev. Patrick J. Greene; Roger Harris; Vidke Hilaire; John Longo; Craig O’Connor; Ashley Rice; Randy Rice; Tom Sgouros; and Yokota Strong

Jack Johnson March 23, 2012 at 09:20 PM
You guys will never learn. They "cycle of debt" is a longstanding myth perpetuated by payday loan opponents and stoked by the media. A reading of any SEC filing by the public payday loan companies will reveal that 94% of all loans are paid back on time. A 36% APR rate cap puts payday lenders out of business. It's been said over and over again, yet nobody seems to want to listen. And if you doubt that, just read the quarterly or annual reports of any public payday loan company such as Advance America. Once payday lenders are gone, demand for short term credit remains. You then force people to more expensive forms of credit, such as bank overdraft fees, or send them to more expensive offshore internet lenders. Please educate yourself on the economics and the reality of short term credit demand before writing.
Jack Baillargeron March 25, 2012 at 06:43 PM
Should just e banned period, I remember when they called it (loan sharkng)!. If you are getting these loans, obviously you need training in fiscal management of your life. You are screwing up somewhere, find out what and stop it. I.E. Cable, expensive cell phones, alcohol, candy, junk food in general, eatng to much, impulse buying etc. Those are all things you do when back on your feet. Many free sevices out there to help you with getting it straight and I am not talkin about entitlement programs, but self-responsibilty programs, we need to get people back to the mind set of you do what you have to do legally to support yourself. Seems to have been lost in so many in this socety over the last 40 or 50 years. Thats my opinion on it anyway.
stephen v. martino March 27, 2012 at 11:53 PM
Mr. Johnson: check out advance america's annual 10-K to the SEC. A bit revealing, to say the least
stephen v. martino March 29, 2012 at 11:48 AM
FOR HELP GETTING OFF THE PAY DAY LOAN TREADMILL...email smartino2121@yahoo.com. Free advice to end the cycle once and for all. Don't be ashamed, just be happy somebody cares enough to want to help!
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EssaySea July 17, 2012 at 09:43 PM
Well...our elected official let us down again. They failed to act on payday lending reform again this year. Let's all hope they wise up next year. I ask all who read this to pay attention to reform efforts next session and join/support the coalition any way you can.
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