The D.C. Council on Tuesday overwhelmingly approved legislation to cap soaring interest rates of payday lenders, a move that a representative of the high interest loan industry said “doomed” their businesses. The bill passed by a 12-1 vote, with only Ward 8 Council Member Marion Barry — once a backer of the measure — standing opposed. Ward 3 Council Member Mary Cheh, who led the charge, characterized payday lenders as an “invasive species” causing “destruction and havoc” in the lives of their borrowers, mostly the working poor.
“They steal money,” Cheh said. “They steal futures by their practices.”
Payday lenders usually furnish small cash advances, about $500 on average, that are to be repaid in a matter of weeks. Borrowers who can’t repay their loans on time are penalized with skyrocketing interest rates, often more than 300 percent, and fees that can quickly double or triple their principle, proponents of the legislation claim.
The bill, which Mayor Adrian Fenty will sign, caps interest rates at 24 percent.
Barry said payday lenders provide a valuable service for some 30,000 people a year in the District, particularly those who are struck by an emergency and need quick cash. The industry, he said, employs 500 people whose jobs will be threatened by passage of the bill.
“All these people who are using this are not being exploited,” Barry said of borrowers.
Speaking for the industry, Willie Green with the Community Financial Services Association said the rate cap will put the District’s payday lenders out of business, driving their customers to Virginia, which has less regulation. The association, Green said, would have preferred regulation, such as limiting rollovers, requiring payment plans and capping loanamounts based on income.
“The industry is doomed here,” Green said. “It really is.”
To which Cheh replied: “If they can’t follow the model and live within the cap, they should go out of business.”
dcexamiNation and poll: What do you think about the payday lenders who operate in D.C.?
