Payday Lending

Opposing Predatory Lending; Protecting Low-Income Assets

The Community Development Project is committed to confronting the threat that payday lending poses to asset development in low-income and minority communities and supporting the development of sustainable short-term credit options for those who need them.

Letter to Representative Luis Gutierrez in Opposition to HR 1214

On Tuesday, April 21, 2009, Lawyers' Committee Executive Director Barbara Arnwine sent a letter to Representative Luis Gutierrez, Chairman of the House Financial Institutions and Consumer Credit Subcommittee, in opposition to HR 1214, the Payday Loan Reform Act of 2009.  HR 1214 would legitimize outrageous triple digit interest rates and undermine congressional efforts, such as those of Senator Dick Durbin and Representative Jackie Speier, to enact meaningful reforms.  In her letter, which was also circulated to Chairman Barney Frank of the House Financial Services Committee, the members of the House Financial Institutions and Consumer Credit Subcommittee, and the members of the Congressional Black Caucus, Arnwine urged Representative Gutierrez to support Representative Speier's HR 1608, which would impose a 36% cap on interest and fees on all consumer credit products.  Read the letter here.

National Usury Rate Legislation

On February 26, 2009, Senator Dick Durbin of Illinois introduced S. 500, which would modify the Truth in Lending Act to establish a national usury rate of 36% for commercial credit transactions.  As part of its efforts to combat the scourge of payday lending nationwide, CDP strongly supports this proposed legislation and has signed onto a national letter of support to that effect.  Other important provisions of the bill are the establishment of criminal sanctions for those who engage in usurious lending practices, the authorization of a mechanism to initiate actions against noncompliant lenders, and the stipulation that the act, if passed into law, could not be used to preempt more restrictive state laws.  Payday lenders target communities of color through discriminatory marketing and branch placement practices.  High rates and hidden fees combine to render payday loans very difficult to repay.  Sucked into the cycle of short-term high interest debt, borrowers experience great difficulty in extracting themselves and become repeat payday loan customers at unsettlingly high rates.  Attempts at saving and building good credit are undermined by the practice of payday lending, and the wealth gap between communities of color and white communities is widened as a result.  Research conducted by the Center for Responsible Lending has indicated that other payday lending reforms, such as the institution of twenty-four hour cool-off periods for repeat borrowers, are not sufficient to curb the deleterious effect of payday loans on borrowers in the absence of a hard cap on interest rates in the neighborhood of 36%.  CDP calls upon its core stakeholders to mobilize in support of this important legislation.

Practical Progressive - Official Selection 2008