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Kia Franklin

DC Tackles Predatory Pay Day Practices

On DMI Blog, Mark Winston Griffith looks at DC's move to protect consumers against predatory payday lending:

The Washington DC council boldly stood up to the payday lending lobby yesterday and essentially made usuriously priced short term loans illegal in the Chocolate City. With a vote of 12 to 1 the Council mandated that payday lenders be subject to the same lending rate caps as credit unions and banks. The sole dissenting vote came from disgraced ex-DC mayor, Marion Barry, who, believe it or not, actually co-sponsored the legislation in the first place. Talk about being on the wrong side of history.

According to a news brief released by the Center for Responsible Lending:

An exemption granted to DC payday lenders in 1998 allowed them to ignore the 24 percent usury cap. Since that time the industry has burgeoned in the District to the point that borrowers have been paying about $3 million per year in fees, as payday lenders trap them in loans with 350 to 550 percent interest rates.

Before the final vote, DC council members made clear their contempt for an industry that preys on working people who are just getting by.

"It's like an alien species let loose in our midst," said Councilmember Mary Cheh after yesterday's final reading in the Council chambers. "They deprive people of the opportunity to get a toehold, to get ahead. They steal money, they steal futures with their practices."

Although payday loans are illegal in New York, they ravage many other states throughout the country. The action taken by the DC Council will hopefully embolden other states to similarly protect low-income communities.

Kia Franklin: Author Bio | Other Posts
Posted at 12:33 PM, Sep 21, 2007 in Consumer Rights | Legislation | Pro-Civil Justice Reforms
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Comments

Hey Kia! Just thought I'd come by the site and say hello. Also, wanted to make sure you guys knew about this ruling:

http://www.newyorkpersonalinjuryattorneyblog.com/Vanguard-v-Huchon.pdf

A Florida federal district court held that Congress exceeded its powers under the Commerce Clause in enacting a provision preempting certain tort claims against car rental companies. Following the Commerce Clause decisions of the Rehnquist Court in Lopez and Morrison (see below), the district court found no rational basis for the conclusion that vicarious tort liability, by itself, substantially affects interstate commerce. Vanguard Care Rental USA v. Huchon, No. 06-10082-CIV, (S.D. Fla. Sep. 14, 2007). The judge is a Bush II nominee.

Posted by: Kevin Hsu | September 21, 2007 1:47 PM

Ack, of course you guys knew and have already written about it. I just didn't look down far enough. Keep up the good work.

Posted by: Kevin Hsu | September 21, 2007 1:57 PM

Thanks Kevin!

Posted by: Kia | September 21, 2007 3:18 PM

Let me tell you something alright? Leading up to the time that we had to take out a cash loan, we didn't see anything but negative remarks from others online about the cash loan industry. We ended up almost losing our car because we waited. At the last minute, we borrowed $400 from cashloancity.com and I really believe it is the only thing "at the time" that saved us. I understand that there's a problem with some people abusing this industry and crying about it later, but what about the people that really need it and pay it back on time? We're even getting ready to have a positive mark on our credit because of it. Why are the people that never need this type of loan the same people that keep others from being able to get one?

Posted by: roy | September 22, 2007 3:15 AM

Wow. One would almost think that payday lenders come up to people with guns and force them to take out loans.

One wonders if Mary Cheh and her eleven fellow travelers on the DC City Council, or the so-called "Center for Responsible Lending," will be opening up their own pockets when people with poor credit need loans, or if they'll just pat these poor people on the head and say, "There, there, aren't you glad we saved you from being able to borrow money?"

Posted by: David Nieporent | September 22, 2007 4:13 AM

Kia: The Mafia loves the DC Council for returning the loan shark business to them.

Posted by: Supremacy Claus | September 22, 2007 5:08 AM

Drug pushers don't roll up on people with guns and force them to take drugs, but it doesn't mean that drug pushers aren't illegal and immoral.

And if you're poor, or get laid off, or find yourself in a financial emergency, then you might as well have a gun to your head. As a user, your level of desperation is the same.

The concept of usury being wrong, abusive and, yes, immoral, goes back to the old tesament. The fact is these payday lenders were able to carve out loop holes that allowed them to avoid interest rate caps that other institutions had to abide by.

Obviously some are able to use payday loans and not find themselves flipping over the loans several times. And yes, of course, there are probably a lot of people who acted irresponsibly in taking out their particular payday loan. But if a high degree of people are being hurt by it, it suggests that something is structurly wrong with the payday lending system. It's not much different from the subprime industry. A few days ago the HUD Secretary said the 1/4 of the 2 million subprime mortgages that will reset over the next 18 months will result in the person losing their home. How much human damage has to occur before someone determines that the product itself is faulty?

Posted by: Mark Winston Griffith | September 22, 2007 3:44 PM

And one more thing. For the person looking for small loan choices. There are a growing number of credit unions that offer more affordable, non-abusive alternatives to payday loans.

But if you'd rather pay alot of money there are no shortage of shady creeps out there willing to sell you an expensive loan. Which brings me back to my pain point. What does it tell you that loan sharks are the natural alternative to payday lenders? What we need to be working towards on a policy level is a unified credit system that doesn't have a seperate set of standards for poor borrowers.

Posted by: Mark Winston Griffith | September 22, 2007 6:19 PM

The idea of a "unified credit system" is about the most ridiculous idea I've seen posted here. Of course lenders should treat borrowers more likely to repay their loans differently than borrowers less likely to do so.

The objective, after all, is to make money and you cannot make money treating all borrowers the same.

If you want to have government set some sort of usury rate that cannot be exceeded, fine then do so, but that should be the extent of government involvement other than to ensure that lending practices don't involve discrimination on the basis of race, religion or ethnicity

Posted by: Paul W Dennis | September 23, 2007 9:57 AM

I do not know if Griffith is a lawyer. If he is a lawyer, the word "usury" is well known lawyer code for "Jew." His posting would then be quite offensive. If he is not lawyer, he would not know lawyer code.

The high interest rate reflects risk, known by the lender, and acknowledged by the borrower, voluntarily borrowing.

I suggest the Walmart method to enrich himself. Underbid the competition.

If he feels he can safely lend money at lower interest rates, let him rent an armored truck. Drive around the neighborhood. Lend money by the standard he proposes for others.

Posted by: Supremacy Claus | September 23, 2007 12:05 PM

I do not know if Griffith is a lawyer. If he is a lawyer, the word "usury" is well known lawyer code for "Jew." His posting would then be quite offensive. If he is not lawyer, he would not know lawyer code.

The high interest rate reflects risk, known by the lender, and acknowledged by the borrower, voluntarily borrowing.

I suggest the Walmart method to enrich himself. Underbid the competition.

If he feels he can safely lend money at lower interest rates, let him rent an armored truck. Drive around the neighborhood. Lend money by the standard he proposes for others.

Posted by: Supremacy Claus | September 23, 2007 12:07 PM

Drug pushers don't roll up on people with guns and force them to take drugs, but it doesn't mean that drug pushers aren't illegal and immoral.

Well, that's where we disagree.

And if you're poor, or get laid off, or find yourself in a financial emergency, then you might as well have a gun to your head. As a user, your level of desperation is the same.

Well, if people need the money for an "emergency," then it seems especially foolish -- not to mention cruel -- to deny them the ability to obtain the money, doesn't it?


Oh, and somehow I doubt the authors of this blog generally defer to the Torah as a source of morality, but to the extent they do, it should be noted that interest, not "usury" as you're using the term, is what is forbidden by Halacha. But if the Torah isn't a source of morality, it certainly isn't a source of financial planning.

Posted by: David Nieporent | September 24, 2007 5:58 AM