WASHINGTON -- Payday loan stores are destroying lives in New Orleans and it's time Congress did something about it, the Rev. Willie Gable Jr. told members and staffers on Capitol Hill this week.
"These are mainly working people who are short money to pay a bill and they take out $300 or $500 not knowing that before they know it they can be trying to pay off 10 loans at interests rates that can exceed 300 percent," said Gable, pastor of the Progressive Baptist Church in New Orleans. "We now have more payday loan stores than we do McDonalds." Gable was part of a group of ministers who met with members and staffers on Capitol Hill, and participated in a payday lending discussion.
Gable wants Congress to expand recently enacted legislation limiting interest rates for payday loans to 36 percent for veterans "We'd like to see Congress extend the limit for everyone," Gable said.
He's also supporting a proposed rule by the Consumer Financial Protection Bureau rule that would require Payday lenders to ensure borrower can pay the loan back – so he/she isn't stuck in an endless of cycle of high interest loans that will take many months or even longer to pay off.
But Gable has met resistance. In 2014, he and other advocates tried to get the Louisiana Legislature to develop what he said were reasonable limits on interest rates for payday loans. But the current limit of 400 percent was not lowered.
In Congress, some members of Congress have expressed concern that the proposed Consumer Financial Protection Bureau proposal might limit options for consumer who have a financial emergency, but can't get loans from banks.
"Sometimes people need diapers, and sometimes they need gas, and they have a flat tire and they can't fix it," said Sen. Heidi Heitkamp, D-N.D. during a Wednesday (July 15) Senate Banking Committee meeting. There's a need to
protect people, Heitkamp said, but "I also understand the need to have some form of small dollar, short-term lending."
The board's director, Richard Cordray, responded that he has the same concerns. But he said government has an obligation to protect people who get their short-term loans rolled over "at very high cost," and end up in a long-term and very expensive "debt trap."
Sen. David Vitter. R-La. another member of the Banking Committee, has asked the Government Accountability Office, the investigatory arm of Congress, to examine whether the Consumer Financial Protection Bureau properly considered the impact on small businesses of the board's proposed rule requiring payday stores to determine if people can pay back their loans.
The Consumer Financial Services Association of America, which represents payday lenders, said over regulation can force many payday operators out of business, denying a financial tool that has helped Americans out of temporary financial problems. "Payday loans represent an important source of credit for millions of Americans who live from paycheck to paycheck," said Dennis Shaul, the association's CEO.
Gable said he and other advocates for regulations on payday loans have received support from Rep. Cedric Richmond. D-New Orleans. He said that Majority Whip Steve Scalise. R-Jefferson, has let him use his office to meet with Republican members and their staffers, but hasn't signed onto any legislative fixes.
Gable said the issue is a moral one because payday lenders "exploit those most in need."
"The Bible warns against exorbitant interest," Gable wrote recently. "For centuries, Christians have spoken of usury as a sin. Jewish and Muslim traditions also carry warnings about lending at interest – particularly when charged to those who are poor. But in recent years, payday lenders have woven themselves into the fabric of our neighborhoods and sought to convince us that they are offering a service of a helping hand to their neighbors. Just the opposite is true."
Category: Payday loans