Lawmakers to Debate Controversial Payday Loans
&Ldquo;Payday lending circumvents state consumer protections,” Senator Juan Pichardo said. “Many of these families using their services are already financially insecure, and these ‘providers’ take advantage of that under the guise of a helping hand. This practice cannot remain acceptable in the state of Rhode Island.” Lenders Have Special ExemptionA payday loan is essentially a cash advance that is supposed to cover expenses until a consumer receives his or her next paycheck. The loans generally last two weeks, and in Rhode Island, cost $10 for every $100 received. The Ocean State is the only state in New England that allows for payday loans.
Supporters of the legislation say capping the interest rates at 36 percent would be similar to the charges military members face when trying to secure a payday loan. They say the only reason payday lenders are able to charge massive interest rates is because they were able to receive a special exemption from the state’s usury laws that allowed them to avoid the state’s small loan laws.
“There’s absolutely no reason our state should be giving any kind of exemption to payday lenders,” State Rep. Frank Ferri said. “The current law allows them to charge families who are living paycheck-to-paycheck outrageous interest that they can’t afford, trapping them in a cycle of loan after loan that leaves them in an even more precarious financial state”
According to the Center For Responsible Lending, only two percent of consumers pay the loan off in full and don’t take out another one within a year. Critics say the high-interest loans target those who can least afford to pay their substantial interest rates, causing spiraling debt for families that are already struggling.
“The coalition of supporters of this bill this year is stronger than ever. We are very serious about making sure that this legislation passes this year so that no more Rhode Islanders are harmed by these predatory products,” said Margaux Morisseau, director of community building at Neighborworks Blackstone River Valley, which has been spearheading community efforts in support of the legislation.