Senator Dick Durbin is on a quest to kill payday loans. His legislation, “Protecting Consumers from Unreasonable Credit Rates Act,” proposes a federal interest rate cap of 36% on all loans.
His support for the bill is of course weak and unfounded. Less than 3% of American families use payday loans. I think Durbin should try and find another scape goat for our economic woes. Also, over 90% of repeat borrowers pay their loans back on time. That’s a far cry from bankruptcy.
A Clemson University study already laid to rest the idiotic rubbish that payday loans are causing anyone to go bankrupt. It simply is not true.
Durbin goes on to say that excessive rates are often hidden. Hidden? The Congress that Dick Durbin is a member of passed this little old law called the Consumer Credit Protection Act. In it, you can find the Truth in Lending Act.
That little piece of legislation requires the full and complete disclosure of all rates and terms of loans, including payday loans. There is nothing hidden about a 400% APR. It has to be displayed prominently and the customer has to be made fully aware of it before they can receive a loan.
The quote of the day, however, comes from Lynda DeLaforgue, co-director of Citizen Action/Illinois.
“People need access to good and clear credit,” DeLaforgue said. “But we don’t need access to unfair, predatory loans that strip people of their dignity,strip people of their assets and send them into bankruptcy.”
My gosh,for someone financially well off who has never received a payday loan, she really does have some strong feelings about them. How do the 6 million or so people getting payday loans each year feel when someone tells them they have no dignity?
Strip people of their assets? What assets? Do payday lenders waltz into people’s homes and take their belongings? Do they have the deed to their homes? Do they seize their investments? I would love to know which assets DeLaforgue is speaking of here besides the cash owed for the loan.
Durbin also had Ramon Bonilla, poster child for this bill, explain how payday loans drove her to bankruptcy. Count on liberal cream puffs in Congress to find the needle in the haystack to illustrate their point…
The truth is payday loans have helped millions upon millions of people. A vast majority of borrowers end up better off for using payday loans. Very few end up worse off. It is not that the product is inherently evil or predatory that those few people ended up worse off. It’s because they borrowed money they could never hope to pay back.
Education is the key, not regulation. Our schools shouldn’t be wasting time teaching arts, poetry and other useless skills and knowledge. Schools should be giving kids knowledge of the real world and how it works. Credit is understood by so few, you have to wonder why no one introduces legislation to require it to be taught in schools…
If people better understood credit and payday loans, then those who should not be borrowing payday loans probably wouldn’t do it anymore. Then payday loans are still around for those who need them and know how to use them (ie: pay them back on time.)
