Our view: Predatory lenders don’t deserve a break from federal lawmakers

After all that Arizonans and people in other states have done to try to rid themselves of payday lenders, it was disheartening to learn some members of Congress are actually entertaining the idea of giving the payday-loan industry new life.

The Associated Press reported April 2 that two congressmen, Rep. Luis Gutierrez, D-Ill., and Rep. Joe Baca, D-Calif., have introduced legislation that would regulate payday lenders.

The AP reported that Gutierrez’s bill, which payday lenders are opposing, would cap the annual interest rate for a payday loan at 391 percent, ban so-called “rollovers” – which let borrowers who can’t afford to pay off a loan renew it for additional fees – and prevent lenders from suing borrowers or docking wages to collect debts.

Baca’s bill, which the payday industry favors, would allow some rollovers and pre-empt state laws, which would effectively pave the way for payday lending in states whose laws currently make it difficult or impossible. It also allows online lenders to charge higher fees than the brick-and-mortar stores.

Both of these bills should be rejected.

Payday lending is effectively banned in 15 states. Arizona could join that group next year if a 2000 law that granted lenders an exemption from the state’s usury laws expires as scheduled.

We’ve editorialized often that payday loans amount to legalized loan-sharking. Allowing lenders to charge interest rates of 400 percent for people who can least afford expensive loans often makes borrowers’ financial situations worse, not better.

The AP reported that the legislation follows stepped-up lobbying efforts and an increase in political contributions by the payday-loan industry to certain members of Congress in recent years.

Gutierrez and Baca have both received financial support from the industry, the AP reported.

Consumer groups have criticized Gutierrez’s bill, calling it filled with loopholes and a gift to payday lenders.

“We don’t believe that this is going to protect consumers. It would, in fact, condone the payday lending that can be extremely harmful to the people who can least afford it,” Jean Ann Fox of the Consumer Federation of America told the AP.

Last fall, Arizona voters overwhelmingly rejected an initiative that would have kept payday lenders in the state indefinitely. The bills being discussed in Congress could undermine that effort as well as anti-usury laws elsewhere.

At the end of 2006, Congress effectively banned payday loans for military personnel, capping loans to such borrowers at 36 percent. If Congress considers payday loans bad for the national’s military force, they should also be considered unwise for the rest of Americans.

We urge Congress, particularly Arizona’s delegation, to fight payday lending. Arizonans have spoken clearly that they don’t want these predatory loans.

If Congress members are really listening to the people – and not payday lenders and their lobbyists – they’ll quickly learn that payday loans are a bad deal.

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