Conservative Viewpoints

"Government is not the solution…it is the problem" -Ronald Reagan



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It’s still payday predation

Posted by Stephen on September 8, 2007

Friday, September 7, 2007

Sonny Eyabi’s payday loan “reforms” [“The District Needs Payday Loan Reform, Not a Ban,” Close to Home, Sept. 2] are akin to putting anti-lock brakes and air bags in a Ford Pinto. Good ideas, but they won’t prevent the gas tank from exploding.

More than 30 states have enacted such measures. But data from government regulators show all have failed to protect borrowers from the payday loan debt trap. The three out-of-the-District companies that own 45 of Washington’s 48 payday stores promote these rules knowing that they guarantee business as usual.

Let’s face it: The payday loan is a defective product. It blows a hole in household finances so large that the borrower is left worse off, not better.

Only 1 percent of payday loans go to borrowers who can pay them off in two weeks and walk away. The remaining 99 percent become long-term debt with high interest rates; annual percentage rates can be up to 550 percent. The average payday loan customer in the District pays back $740 to borrow just $325.

The special exemption for payday loans from the District’s 24 percent interest rate limit has stifled competition, shutting out lenders with responsible credit products. There’s no excuse for leaving us at the mercy of the Pintos.

JILLIAN ALDEBRONPolicy Counsel

Center for Responsible Lending

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