- Senator Perata
For the second straight year, my efforts to protect unsuspecting consumers from the largely unregulated "payday loan" marketers was turned back by the powerful industry lobby. After successfully negotiating a bill in the senate to give low income borrowers an opportunity to repay the loan in four installments (after first failing to repay the loan in its entirety), I lost it in the Assembly Banking and Finance Committee without even receiving a second on the motion to approve!
Notwithstanding the support of the Consumers Union, organized labor, AARP and many veterans organizations, the committee was unmoved in the face of strong industry opposition.
As a result, it is unlikely that anything further can be done this session to protect hundreds of thousands of working poor and elderly from getting ensnared in the payday loan debt spiral.
Under present law, if you borrow $100, you pay a $17.50 fee and must cover your check by the next pay period. If you fail to do that, you must borrow another $100 to pay back the original loan in full. My bill would allow the consumer to repay the loan in four installments over eight weeks, thus avoiding the recurring need to borrow and pay the fee every month until you can repay the loan.
According to the industry's own accounts, about 20-25% of their customers cannot repay the first loan and find themselves on the "debt treadmill." Payday or payday advance loans are a relatively new financial product that have exploded in urban neighborhood throughout the state.
I plan to reintroduce the bill again in December. Hopefully, with better luck in the Democratic assembly!
Sincerely,
