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Letter: Support Curbs On Payday Lending Interest Rates

A consortium of groups and individuals is calling on the Rhode Island General Assembly to support limits on the interest rate allowed on so-called payday loans.

To the editor:

The [Rhode Island] House Committee on Corporations is considering legislation to reduce the legal rate of interest on payday loans from the unconscionable APR of 260% to 36%. The bill (H-7257) has been co-sponsored by 50 of 75 representatives. The senate bill (S-2307) is co-sponsored by 26 of 38 senators. Because of the likelihood of passage, lobbyists for payday lenders are trying to make sure that the bills never get a vote in either chamber.

Payday loans are marketed as short-term solutions to a cash shortage. In reality, borrowers get trapped in a cycle of borrowing at unconscionable interest rates. The family that couldn’t afford to pay expenses before obtaining a payday loan now has to shoulder the burden of triple-digit interest on a low risk loan as well. When a loan is repaid, the borrower generally needs to obtain a new loan to pay living expenses until the next pay period. Once the cycle begins, the interest paid consumes an increasing portion of the borrower’s income as the size of the loans obtained increases over time.

The payday loan becomes a long-term obligation where the interest paid far exceeds the amount of the loan obtained. The financial impact of obtaining a payday loan for the full amount of a paycheck is the equivalent of a taking a voluntary 10-percent pay cut at a time when you can least afford it.

Rhode Island is the only New England state which allows payday lenders to charge an APR in excess of 36%. The payday loan exception to Rhode Island’s usury laws was enacted in 2001. In 2007 Congress banned payday lending to military personnel at rates in excess of 36% finding that the threat presented to military families by payday loans was a threat to national security.

Where high interest payday loans have been abolished, the availability of small consumer loans at 36% has increased substantially. Despite these facts, the lobbyists sent by the payday lending industry are trying to convince the
House Committee on Corporations that Rhode Island’s citizens could not survive without payday loans. In fact, Rhode Islanders have survived for decades without high interest payday loans just as military families and the residents of every other New England state do today.

Given these facts, it is a moral imperative that the House and Senate Committees on Corporations recommend passage of payday loan reform.

Sincerely,

Steve Boyajian

Previous articles on this topic:

  • , Jun. 16, 2011
  • , Jun. 17, 2011

Editor's Note: According to information posted online by the Rhode Island General Assembly, the House Committee on Corporations recommended the bill be held for further study on Mar. 14. No action has been taken by the Senate following the bill's introduction.

stephen v. martino March 28, 2012 at 02:47 PM
EssaySea: I am that former store manager who testified against the industry. Trust me, this asinine business is nothing more than "get-rich-quick." It's low risk, with huge profits. In fact, the only major risk these companies face is more regulation. Even their own extended payment plan (EPP) for customers is also considered a risk factor, according to Advance America's 10-K report to the SEC. I will not stop this fight until these companies stop profiting off the backs of hardworking, decent Americans. I am a treasure-trove of information on this industry, and if anybody needs any information to help get out of the so-called "debt cycle" I can be reached at smartino2121@yahoo.com.
EssaySea March 28, 2012 at 02:51 PM
@Stephen: Kudos to you sir!
stephen v. martino March 29, 2012 at 11:44 AM
@Essay: Thank you, much!
Joseph Hutnak March 29, 2012 at 02:19 PM
Hi Steve: Your comment posted at 7:55 a.m. on Mar. 29 has been removed under our Terms of Service which prohibits any post that "contains any advertising, promotional materials... or any other form of solicitation." I have left your previous comment — which includes your email address — intact, as it appeared to be intended to inform. If you'd like information on how to advertise with Patch, please send me an email and I will forward you the contact information for our advertising department.
stephen v. martino March 29, 2012 at 05:37 PM
Joe: Gotcha.

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