"While they may not be JP Morgan Chase or Bank of America, they're very powerful. Their influence should not be underestimated," Gutierrez, the top Democrat on the Financial Services subcommittee in charge of consumer credit issues, said in an interview this week.
Indeed, the payday lending industry is strenuously resisting Gutierrez's measure, which it says would devastate its business. The measure would cap the annual interest rate for a payday loan at 391 percent, ban so-called "rollovers" - where a borrower who can't afford to pay off the loan essentially renews it and pays large fees - and prevent lenders from suing borrowers or docking their wages to collect the debt.
A newer player representing Internet payday lenders - a growing segment of the market - also ramped up its lobbying and political giving efforts. The Online Lenders Alliance, formed in 2005, nearly quintupled, to $480,000, its lobbying expenditures from 2007 and 2008. It contributed $108,400 to candidates in advance of the 2008 elections compared to about $2,000 in the 2006 contests. Gutierrez was among the top House recipients, getting $4,600, while the top Senate recipient was Sen. Tim Johnson, D-S.D., a Banking Committee member who got $6,900.
After watching members of the military fall prey to exorbitant payday loans, Congress in 2006 capped the interest rates for military payday loans at 36%. Fifteen states have similar caps or outright bans.
Congressman Gutierrez is competing with Congressman Joe Baca to see who can author the biggest giveaway. Baca's legislation would allow rollovers, higher fees for online banks, and would pre-empt state laws banning payday loans.
Someone—maybe Carolyn Maloney, who did an excellent job with the Credit Card Bill of Rights—needs to step up and punch the payday lending lobbyists in the face.
I just can’t imagine payday loans with low interest rates. It will make no sense for payday lenders to lend money to people with bad credit quickly and with low interest rate. People have always paid for urgency – when you need something really quickly then you should be ready to pay the price which is higher than usual. But I think that people should use payday loans in 1 hour more prudently than they actually do. This service isn’t intended for covering casual expenses or something like that. In case you have an emergency and ready to pay back in a couple weeks then a payday loan will not be expensive. The most important is to set a budget and make sure that after paying off first loan you will no need another one because not enough money will left for buying all the necessary things.
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