Federal reform legislation advances as Arizona Senate panel kills bill that would have kept payday lenders in business
WASHINGTON – U.S. Rep. Gabrielle Giffords is praising inclusion of tough payday lending provisions in financial regulatory legislation being considered by the U.S. Senate.
“During these tough economic times, more and more families are turning to payday lending for quick lines of credit,” Giffords wrote in a letter sent today to Sen. Christopher Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee. “Failure to regulate these entities has allowed them to use deceptive and abusive practices to reap giant profits at the cost of consumers.”
Dodd’s committee is considering legislation that would establish the Consumer Financial Protection Bureau that would write rules for banks and other entities offering financial services or products to individuals. It also would have the authority to develop and enforce regulations for large payday lenders.
Giffords noted that Arizona has more than 700 payday lending outlets that can charge up to 600 percent annual percentage rate for a two-week loan. “Overall, payday lending costs Arizonans more than $150 million per year,” the congresswoman wrote.
On Friday, Giffords sent a letter to Dodd asking for increased federal regulation and oversight of payday loan firms, saying the high-interest businesses are “unscrupulous lenders.” Giffords acted after there were reports that some senators wanted to exempt payday lenders from oversight by the new consumer financial protection agency.
Giffords’ letter came after the Arizona Senate Appropriations Committee moved to clamp down on payday lenders. The committee on Tuesday voted to kill a measure that would have allowed payday lenders to continue their exemption from state laws limiting loan interest rates to no more than 36 percent a year.
Without the exemption, which expires June 30, the high fees lenders now charge will become illegal.
Before 2000, loans with annual interest rates of more than 36 percent were prohibited in Arizona. That year, industry lobbyists persuaded lawmakers to approve “deferred presentment transactions” until June 30, 2010. In 2008, Arizona voters soundly rejected an initiative financed by $14 million from the payday lending lobbying association that would have allowed the industry to continue operating.
Giffords already has voted for tough regulations intended to curb the predatory practices of the payday lending industry. On Dec. 11, she joined a majority of her colleagues in the House to pass H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009. She is urging the U.S. Senate to adopt the same regulations.
A copy of Giffords’ letter to Dodd is below.
March 17, 2010
The Honorable Christopher Dodd
Chairman
Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Dodd:
Thank you for your leadership and hard work in putting together important financial regulatory reform legislation. I have read your proposal and commend you for including oversight for payday lenders in your draft bill.
As I indicated in my March 12 letter to you, I am deeply concerned about the deceitful practices of payday lenders. During these tough economic times, more and more families are turning to payday lending for quick lines of credit. Failure to regulate these entities has allowed them to use deceptive and abusive practices to reap giant profits at the cost of consumers. My state of Arizona has more than 700 payday lending outlets that charge up to 600% annual percentage rate (APR) for a two-week loan. Overall, payday lending costs Arizonans more than $150 million per year. We must take action to stop this exploitation of people who are trying to survive financially as our country works its way out of this recession.
Unregulated lenders not only hurt individual borrowers, but compounded across the county, they have put the entire financial system at risk. As the Senate Banking Committee moves forward with this legislation, I urge you to ensure that strong provisions to govern payday lenders and protect consumers remain in the bill.
Thank you for your consideration of my request.
Sincerely yours,
Gabrielle Giffords
Member of Congress