Posted by AzBlueMeanie:

House Press release from Rep. Gabrielle Giffords:



Congresswoman authors legislation to strengthen Arizona law and extend it to all states 


WASHINGTON – U.S. Rep. Gabrielle Giffords today announced she is introducing legislation that would effectively ban payday lending nationwide, including a prohibition on predatory auto title loans.

“Arizonans have said strongly and consistently that we want these predatory lenders driven out of our state,” said Giffords. “With this bill, my goal is to extend that ban nationwide while also outlawing the new tricks payday lenders have up their sleeves.”

Giffords will introduce the Predatory Lending Sunset Act on Thursday – the same day that an Arizona law takes effect to ban payday lenders that offer loans with interest over 36 percent annual percentage rate.

“The timing is not coincidental,” said Giffords. “We must seize this opportunity to send a clear and forceful message to predatory lenders and their allies.”

Giffords’ bill will include all the prohibitions in the Arizona law. But the congresswoman’s bill also goes further to stay a step ahead of the payday loan industry which is rolling out predatory lending traps that skirt the letter of the Arizona law.

Payday lenders in Arizona already are offering auto title loans – loans secured by a title to a vehicle already owned by the borrower. Under state law, such loans can generate annual returns of up to 204 percent. According to the Center for Responsible Lending, more than 200 payday lending stores in Arizona have received auto-title loan licenses in the past two years, as it became apparent payday loans would end.

“A June 28 editorial in Inside Tucson Business did an excellent job of summing up the challenge we face,” Giffords said. “The paper wrote that ‘payday lenders tend not to go away quietly. For an industry that makes lots of money preying on the poorest among us with small high-interest loans, these are not the kind of people who are about to leave a crumb on the table.’”

Giffords’ proposed legislation already is being welcomed by Arizonans, including the co-director of the Center for Economic Integrity and a state legislator. A national consumer organization also expressed support for federal legislation that cracks down on payday lenders.

“The Center for Economic Integrity strongly supports federal consumer protections that rein in triple-digit interest rates on small loans,” said Kelly Griffith, co-chair of the Tucson-based center.

“As Arizona prepares to sunset the law that for the past 10 years has allowed a particularly abusive predatory lending scheme in our state to operate, putting Arizonan’s critical assets – bank accounts – at risk and extracting millions of dollars from our local economies, we welcome Representative Giffords’ efforts at the national level to curb abusive small loan lending practices for all Americans,” Griffith added.

State Sen. Debbie McCune Davis, D-Phoenix, who has been active in consumer-protection issues, also expressed support for the bill.

“This bill represents the natural next step in the fight against triple-digit-interest payday loans,” McCune Davis said. “Arizona just joined 15 other states and the District of Columbia in cracking down on these predatory lenders. Rep. Giffords’ bill attempts to provide all Americans with the same level of consumer protection we now enjoy in Arizona, and I hope that others in our Congressional delegation will sign on as co-sponsors of this important legislation as soon as possible.”

An executive of the Consumer Federation of America also supported federal legislation to outlaw payday lenders.

“All Americans should be protected from triple-digit interest rates for short-term loans,” said Jean Ann Fox, director of financial services for the federation. “We support legislation that extends the credit protections Congress enacted for service members to all consumers. No lender should be allowed to hijack borrowers' bank accounts or put ownership of the family car at risk for quick credit.”

Payday lending began in Arizona in 2000 when the Arizona Legislature created a “deferred presentment licensing program” that allowed payday lenders to charge interest rates far in excess of the 36 percent annual rate cap imposed on other lenders, including banks. The licensing was to last 10 years, unless lawmakers made it permanent.

That licensing program expires today. Arizona voters overwhelmingly defeated a 2008 ballot initiative sponsored by the payday loan industry that would have kept such lending alive. Several attempts in the Legislature this year to allow payday lending to continue were not successful.

Arizona is the 16th state to effectively ban payday loans and at least another six states are considering such a ban.

Payday lending storefronts traditionally have operated in low-income areas and near military bases. Giffords pointed out that in 2007, Congress passed a 36 percent cap on consumer loans to all active-duty members of the armed services and their families – effectively banning payday lenders from preying on men and women in uniform.

Enacting a strict 36 percent interstate rate cap for all borrowers would extend those same protections to veterans, their families and all Americans, Giffords said.

Giffords’ Predatory Lending Sunset Act would:

• Ban loans with annual percentage rates in excess of 36 percent. Payday lenders have said they cannot afford to offer loans at that interest rate – the same limit now imposed on banks and other financial institutions.

• Ban loans secured by the borrower's vehicle title. This is not a ban on making a loan to purchase a car when the loan is secured by the vehicle. This prohibits lenders from making cash loans secured by the title to the vehicle the borrower already owns. 

• Close the single payment loophole in the Electronic Fund Transfer Act which permits online payday lenders to access consumers' bank accounts.

• Ban the use of remotely created checks or demand drafts. Online lenders and telemarketers who have consumers’ bank account numbers create paper checks unsigned by the consumer and take money out of the consumer's bank account. Demand drafts are used by online lenders to deprive consumers of protections already existing in federal law.