Letter: Support Curbs On Payday Lending Rates

The General Assembly may consider limits on the interest rate allowed on so-called payday loans, but lobbyists are pushing against consideration.


To the editor:

The Rhode Island House Committee on Corporations is considering legislation to reduce the legal rate of interest on payday loans from the unconscionable APR of 260 percent to 36 percent. The bill (H-7257) has been co-sponsored by 50 of 75 representatives. The senate bill (S-2307) is co-sponsored by 26 of 38 senators. Because of the likelihood of passage, lobbyists for payday lenders are trying to make sure that the bills never get a vote in either chamber.

Payday loans are marketed as short-term solutions to a cash shortage. In reality, borrowers get trapped in a cycle of borrowing at unconscionable interest rates. The family that couldn’t afford to pay expenses before obtaining a payday loan now has to shoulder the burden of triple-digit interest on a low risk loan as well. When a loan is repaid, the borrower generally needs to obtain a new loan to pay living expenses until the next pay period. Once the cycle begins, the interest paid consumes an increasing portion of the borrower’s income as the size of the loans obtained increases over time.

The payday loan becomes a long-term obligation where the interest paid far exceeds the amount of the loan obtained. The financial impact of obtaining a payday loan for the full amount of a paycheck is the equivalent of a taking a voluntary 10-percent pay cut at a time when you can least afford it.

Rhode Island is the only New England state which allows payday lenders to charge an APR in excess of 36 percent. The payday loan exception to Rhode Island’s usury laws was enacted in 2001. In 2007 Congress banned payday lending to military personnel at rates in excess of 36 percent finding that the threat presented to military families by payday loans was a threat to national security.

Where high interest payday loans have been abolished, the availability of small consumer loans at 36 percent has increased substantially. Despite these facts, the lobbyists sent by the payday lending industry are trying to convince the
House Committee on Corporations that Rhode Island’s citizens could not survive without payday loans. In fact, Rhode Islanders have survived for decades without high interest payday loans just as military families and the residents of every other New England state do today.

Given these facts, it is a moral imperative that the House and Senate Committees on Corporations recommend passage of payday loan reform.


Steve Boyajian 

Previous articles on this topic:

  • , Jun. 16, 2011
  • , Jun. 17, 2011

Editor's Note: According to information posted online by the Rhode Island General Assembly, the House Committee on Corporations recommended the bill be held for further study on Mar. 14. No action has been taken by the Senate following the bill's introduction.

John April 11, 2012 at 04:01 AM
I would like to see our government officials work on getting MORE access to capital and not make us jump through hoops in the process. My wife and I just tried to refinance our home, with the same bank that we've been with for 15 years - never a late payment. I can't believe how hard it is. I think you might find more and more people need different areas to access credit. Banks won't permit loans to some people and they only do the short-term loans for existing customers. Boy oh boy, I'm starting to think I would have a hard time getting my bank to give me short term loan, after all we've been through lately!
RobertT April 20, 2012 at 01:48 AM
36%APR for a two week loan is, what? A dollar? I will absolutely take that loan! I could make money off that short term loan! I'm all in.
Bob C April 20, 2012 at 04:55 AM
More gov't intrusion where it shouldn't belong. Oh yeah, this is New England (except NH) where the gov't is king and the private sector is the annoying court jester!
Payday Loan May 09, 2012 at 07:49 AM
Well I think nothing gives better information on the payday loans topic rather than this article. Nice post. Keep it up http://www.instantloansneed.co.uk/payday-loans/
Ashlesh Sharma September 05, 2012 at 06:49 AM
Payday advance has many facts and know in detail about it http://www.looking4loan.com/


More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »