By Adam Doster
April 8, 2009
Standing with consumer advocates in front of a Chicago payday loan
store yesterday, Sen. Dick Durbin did not mince words about the effect
these forms of credit are having on working people across the country.
Describing the skyhigh interest rates as "totally out of hand," he
called on Congress to enact his recently-introduced usury reform bill,
which would cap annual interest rates for consumer credit at 36
percent. "Whether you’re talking about credit card accounts, whether
you’re talking about these payday loan operations," he told reporters,
"the interest rates they’re charging now are nothing short of

A coalition of consumer rights groups agreed. Standing shoulder to
shoulder with the senior senator, Citizen Action/Illinois director
Lynda DeLaforgue called the bill a courageous effort to protect
American families. "People need access to good and fair credit," she
said. "People do not need access to bad and predatory credit which
strips them of their assets, their dignity, and all too often sends
them into the courts and bankruptcy."

DeLaforgue and her colleagues are urging Congress to consider
Durbin’s bill, which they see as a better alternative than the Payday
Loan Reform Act of 2009, introduced by Rep. Luis Gutierrez in his
capacity as chairman of the House Subcommittee on Financial Products
and Consumer Credit. The Chicago congressman made quite clear during a
committee hearing last week that he thinks Durbin’s bill is too
restrictive to pass both chambers in its current state, given the
industry’s clout. And as Mike Lillis of the Washington Independent
points out today, "Gutierrez should know":

The top contributor to his 2008 campaign was payday lender QC
Holdings, which donated $10,100, according to the Center for Responsive
Politics. Another payday powerhouse, the Online Lenders Alliance,
contributed an additional $4,600.

But reformers don’t think that the compromise legislation
sufficiently protects borrowers. One major concern with Gutierrez’ bill
is that applies only to loans with durations of 91 days or less.
Illinois’ Payday Loan Reform Act of 2005 used a similar approach, only
covering loans that had to be paid off within 120 days. But the payday
lending industry simply stretched the terms of its loans beyond that
limit to evade the new regulation. "Every time policymakers in Illinois
take one step forward," said Woodstock Institute President Dory Rand at
the press conference yesterday, "the industry finds a way around it and
we take two steps back.”

At the state level, Rep, Julie Hamos is trying to close that
loophole. A measure she took sponsorship of last week (HB 3901) would
change the definition of "payday loan" to include any loan with a
finance charge exceeding an annual percentage rate of 36 percent, not
just those used over a 120 day period. While the powerful industry will
be out in full force to beat back the legislation, targeting Democrats
who have not yet voiced their support, DeLaforgue tells us that the
bill could be heard in the House Financial Institutions Committee when
the General Assembly returns to the capitol after spring break.

Meanwhile, consumer groups will push federal legislators to look at
Illinois’ payday loan experience before they ratify Gutierrez’ reform.
A senate aide told Lillis Tuesday that the Durbin bill “is likely to
move” this year as part of a larger finance reform package being
assembled by Senate Banking Committee Chairman Chris Dodd (D-Conn.). If
true, that’s a great sign.

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