Brett Smiley: No More Delays on Payday Lending Reform

June 13, 2013
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Rhode Island must join the rest of the New England states and stop exempting payday lenders from the 36 percent interest rate cap that applies to other lenders, writes Brett Smiley, Chief Advocate for the Rhode Island Payday Lending Reform Coalition. Unlike other lenders, payday companies benefit from a special loophole in state law that allows them to impose interest rates as high as 280 percent. This can push financially vulnerable consumers into a cycle of debt that forces them to take out new loans in order to repay previous ones. It also allows the payday industry to siphon some $1.7 million from the Rhode Island economy, according to a study by The Insight Center for Community Economic Development. Large majorities in both chambers of the Rhode Island General Assembly are on board with legislation that would require payday lenders to honor the same 36 percent annual interest rate cap as other lenders. While more alternatives to payday lending are needed, options already exist. The majority of state-chartered banks offer unsecured personal loans; and Rhode Island has the nationally recognized Capital Good Fund that makes safe, affordable loans to consumers who would otherwise be unable to participate in the mainstream banking system.
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