by Barbara Nevins Taylor
We don’t understand why state legislators coddle payday lenders. 15 states and the District of Columbia have strict laws either banning or limiting payday loans, according to the National Conference of State Legislators. This type of loan is a rip-off and a trap for an estimated 12 million Americans who pay as much as 400%-700% interest because they made the mistake of getting a short-term loan as an advance on their paycheck. You’d think elected officials would vote to help and protect consumers. Instead, legislators in Virginia recently failed to vote for a proposal to tighten its laws. A proposal in North Carolina’s state senate would bring back payday loans, which were abolished there ten years ago, according to the Center for Responsible Lending.
New York Takes Aggressive Action
That’s why we like the aggressive action of New York’s Governor Andrew Cuomo. Even though payday lending is illegal in New York, lenders work the Internet to circumvent the law and attract unsuspecting borrowers. Cuomo just sent a letter to debt collectors in New York State reminding them that collecting on a payday loan is illegal in the state because payday lending violates the New York’s usury law. He warned the debt collectors that New York intends to prosecute anyone found violating the law.
Cuomo gets it right. He said, “Studies clearly show that payday loans are not a solution for people with low incomes, but rather a high cost debt trap. That’s why they are illegal in New York, and the state will continue to protect consumers from these misleading loans.”
There’s an excellent The New York Times article that explains how big banks enable the online payday lending industry.
Watch the Video
ConsumerMojo.com’s, “What’s Wrong With Payday Loans? video gives a clear picture of why more states should crackdown on payday lenders.