A Ban on High-Cost Loans May Be Coming – NPR

EVA Issues in the News

On November 12, 2019, Congressmen Jesús “Chuy” García (IL-04) and Glenn Grothman (WI-06) introduced the bipartisan Veterans and Consumers Fair Credit Act, which would cap the interest rate for all small dollar “payday” and car-title loans at 36%. To learn more about this effort to limit predatory lending nationwide, read the following overview from Chris Arnold of National Public Radio, and see the one-page fact sheet for the bill here.

A few years ago, money was very tight for Chasity Wohlford. The Houston resident, who was working a low-wage job, needed to fly to Colorado for a family emergency. She says a friend told her, “Oh, just go to this payday lender. It’s super easy.” But Wohlford ended up over her head in debt after taking out that loan.

The U.S. military realized some years ago that a lot of service members were getting into serious trouble with payday and other loans with annual interest rates of 300% or higher. In 2006, President George W. Bush signed into law a measure that caps interest rates to protect active duty troops. Now, some members of Congress want to expand those safeguards to cover all Americans.

Wohlford says she thought she understood her loan. She borrowed $460 and she’d have to pay back $560. But Wohlford says that as she was going over the paperwork with an employee at the payday lender, “the lady was speaking so fast and was like, ‘OK this, and this and this.’ “

Wohlford says she was told she could make the payments over the next month instead of a week. But she didn’t realize that piled on more interest and fees. She fell further behind. Eventually, she says she had to pay back about $1,200. That’s nearly three times what she borrowed.

Digging out of the hole took eight months. “My rent got behind, my lights got cut off once, my cable got turned off and it went to a collection agency,” she says. “It was just a mess.”

Wohlford finally went to her employer to ask for money to get her electricity turned back on. “Imagine how embarrassing that was,” she says, “to have to go to them and tell them that I can’t take care of my home.”

If Wohlford was active duty military, it would be illegal to give her a high-interest loan like this. And in fact, she is a Navy veteran. But vets aren’t covered by those protections.

The Military Lending Act caps annual interest at 36% and offers other safeguards. The Defense Department said “predatory lending undermines military readiness” and “harms the morale of troops and their families.”

Now, lawmakers are planning to introduce a bill in the coming days that would extend that protection to veterans such as Wohlford, and everybody else too.

“We’re going to expand it to the rest of the country,” says Rep. Glenn Grothman, R-Wis. He’s joining four Democrats who will be introducing House and Senate versions of the Veterans and Consumers Fair Credit Act.

“It’s hard to imagine who would want to take out a loan with an interest rate of of 150 or 200% a year,” Grothman says. “There is no way that is in anybody’s best interest at all, and taking advantage of people who are either in desperate straits or more likely just plain financially illiterate is immoral.”

Read the full post at National Public Radio.

Issues in the News highlights news items focusing on key issues for poor and low-income families, from fair work and access to health care to family economic security, criminal justice reform, voting rights, and more.

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