Durbin Introduces Bill to Crack Down on Interest Rates
STORY UPDATE: Durbin reintroduces "payday" legislation in 2009.
The Senate's second-highest Democrat has introduced legislation to curb predatory lending.
Sen. Dick Durbin (D-Ill.) this week introduced the Protecting Consumers from Unreasonable Credit Rates Act -- a bill he says is to eliminate the excessive rates that some consumers are charged for payday loans, car title loans and other types of credit.
“Within blocks of my home in Springfield, Illinois, there are payday lenders charging interest rates of two and three hundred percent of the value of the loan,” Durbin says. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least. Congress must enact protections against predatory lending. America’s working families depend on it.”
Durbin’s bill would establish a federal usury cap of 36 percent APR on all consumer credit transactions. That rate is similar to usury caps already enacted in many states and is the same as the cap already in place for military personnel and their families. While 36 percent may sound high, many loans have hidden fees and variable rates that dramatically add costs, Durbin says.
The Chicago Tribune recently reported the story of 66 year-old Rosa Mobley, who lives on Social Security and a small pension. Mobley took out a car title loan of $1,000 and was charged 300 percent interest, Durbin says. She wound up paying more than $4,000 over 28 months and is struggling to get by. Under Durbin’s legislation, the most Mobley would have paid was $60, in interest, per month or $1,680 for 28 months.
Predatory payday lending strips $4.2 billion per year from cash-strapped families by trapping customers in 400 percent interest loans they can't afford to pay off, according to the Center for Responsible Lending, which supports Durbin's bill.
"With the economic downturn weighing heavily on families and threatening their financial security, we have for too long neglected to take this simple step," says Kathleen Keest, senior policy counsel with the Center for Responsible Lending. "This is a fix we can all agree on whether we are concerned about repairing this broken economy or protecting the opportunity for struggling families to hold on to their middle class status. It will bring quick relief from the legal loan sharks that plague our neighborhoods all across the country."
"The Pentagon saw the problem years ago and asked Congress to pass a 36 percent cap to protect our military families, who were targeted by high cost lenders that undermined readiness and damaged military family finances," says Jean Ann Fox, director of financial services for the
Consumer Federation of America. "Congress did. It's time we gave all our citizens the same respect and end the access of predatory lenders to the wallets and assets of hardworking Americans."
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The Senate's second-highest Democrat has introduced legislation to curb predatory lending.
Sen. Dick Durbin (D-Ill.) this week introduced the Protecting Consumers from Unreasonable Credit Rates Act -- a bill he says is to eliminate the excessive rates that some consumers are charged for payday loans, car title loans and other types of credit.
“Within blocks of my home in Springfield, Illinois, there are payday lenders charging interest rates of two and three hundred percent of the value of the loan,” Durbin says. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least. Congress must enact protections against predatory lending. America’s working families depend on it.”
Durbin’s bill would establish a federal usury cap of 36 percent APR on all consumer credit transactions. That rate is similar to usury caps already enacted in many states and is the same as the cap already in place for military personnel and their families. While 36 percent may sound high, many loans have hidden fees and variable rates that dramatically add costs, Durbin says.
The Chicago Tribune recently reported the story of 66 year-old Rosa Mobley, who lives on Social Security and a small pension. Mobley took out a car title loan of $1,000 and was charged 300 percent interest, Durbin says. She wound up paying more than $4,000 over 28 months and is struggling to get by. Under Durbin’s legislation, the most Mobley would have paid was $60, in interest, per month or $1,680 for 28 months.
Predatory payday lending strips $4.2 billion per year from cash-strapped families by trapping customers in 400 percent interest loans they can't afford to pay off, according to the Center for Responsible Lending, which supports Durbin's bill.
"With the economic downturn weighing heavily on families and threatening their financial security, we have for too long neglected to take this simple step," says Kathleen Keest, senior policy counsel with the Center for Responsible Lending. "This is a fix we can all agree on whether we are concerned about repairing this broken economy or protecting the opportunity for struggling families to hold on to their middle class status. It will bring quick relief from the legal loan sharks that plague our neighborhoods all across the country."
"The Pentagon saw the problem years ago and asked Congress to pass a 36 percent cap to protect our military families, who were targeted by high cost lenders that undermined readiness and damaged military family finances," says Jean Ann Fox, director of financial services for the
Consumer Federation of America. "Congress did. It's time we gave all our citizens the same respect and end the access of predatory lenders to the wallets and assets of hardworking Americans."
Watch more breaking news now on our video feed:
Bookmark http://onthehillblog.blogspot.com/ and drop back in for more news from the nation's capital.
Labels: Congress, Dick Durbin, interest rates, lending, loan sharks, military, predatory lending, Protecting Consumers from Unreasonable Credit Rates Act, Senate
posted by Scott Nance at
6:14 PM
2 Comments:
My name is Dean Kesler and, I understand the reasoning behind this Bill. I have no problem with the idea of cracking down on payday loan stores and check advance lenders, etc.. I myself have used these companies in the past. I hated it when I did it but, it was out of necessity that I did it.
Then, I discovered a lending company that was different than the typical payday lenders. I discovered, completely by coincidence, Security Finance. I was in town to go to a payday lender and drove past Security Finance. Out of pure curiosity, I turned around and checked it out. I simply assumed it was the same as
the other places and I was in town to get money for an emergency situation with our dog. Each place will lend only according to your income and, I assumed Security Finance was the same type of lender. It most definitely is not the same as those others!
In fact, Security Finance loaned me
almost enough to cover the entire amount I needed!
Security Finance has been there for me and, I have recommended them to six people and all six have gone to Security Finance for loans multiple times. In fact, 5 of us currently have loans with them.
They are nothing like the payday lenders at all! Yes, the interest is higher than going to my local credit union or bank but, some of us with a less than stellar credit
history, cannot walk into these places and get a loan. My own credit union will not take a chance on me! Security Finance helps those of us that need money, are willing to pay a little higher interest, and want to try to rebuild our credit! Security Finance does just that. They report our payment information to the credit bureaus, thus improving our credit histories/ratings.
People like myself and my family need Security Finance! I don't care what happens to the predatory lenders, maybe they do need to be stopped. But an institution like Security Finance should not fall in the same category as these other places!
I need Security Finance desperately! You have no idea how much of an adverse effect closing them down would have on my life and, the lives other people just like me!
I too could understand the reasoning of this bill if it was logical. A 36% cap on payday loans would put all payday lenders out of business. The state that I live in charges 17.50 per 100.00 dollars that thay loan with the largest loan being 500.00 thats only 87.50. These loans are put out there to be short term loans. I know the payday lenders in the state I live in actually give customers the option to pay loans out in 4 equal payments in order to help them get out of debt. Also Senator Durbin stated "These excessive rates are often hidden" , in the lobby of the company that I use they have their fees posted in a 2x4 foot frame in bold black print , I truly dont see how you could call that hidden. I truly believe by taking away this short term tool from consumers will only make things more crippling to consumers who cant go to a bank or credit union to borrow money. Perhaps Senator Durbin should introduce a bill to cap the rates that banks charge for overdraft charges, I think that would be more helpful to consumers, rather than taking away a tool that they choose to make ends meet from paycheck to paycheck. Also think about this, when and if this bill is passed and all the payday loan store close, hundreds of thousands of people that are employed by these companies will be out of jobs and standing in the unemployment line, how is that going to help the already broken economy?
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