As he did in the news conference this morning, Speaker Merkley pointed out that all the states that don't have a uniform interest rate cap have a problem with payday and car title lenders charging triple digit interest. And he listed states that have tried in the past to do piecemial, targeted solutions to specific loan types: Pennsylvania, Texas, Illinois, for example and talked about some of the bizarre Frankenstein loan products that the lenders created in order to get around the laws.
He mentioned something called an "Open-ended" line of credit. That's a credit line that the loan shop holds open for you...for a fee. We've seen contracts on these loans that would make Tony Soprano blanch with shame. Advance America issued this credit line in Pennsylvania to get around a payday loan interest rate cap. They'd hold $500 for you, available to borrow at any time - but to have that privilege you have to pay $149.00 per month. Not techinically a "Payday loan," right? That's how they get around interest rate caps that don't incluce all consumer loans.
The Speaker also said, "for the last 2.5 weeks I’ve been in conversations with the consumer lending industry and my point has been if there is a way to close these loopholes that will solve the problems we’ve seen in other states, that’s a legimate point of consideration."
In other words, he's willing to listen, but the lenders are not interested in any reasonable regulations that might affect their profits and hurt their interest rates.
Oh, next up: industry lobbyists.
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