On July 24, 2013, Rebecca Borné, senior policy counsel for CRL, testified before the Senate Special Committee on Aging on how payday lending affects senior citizens. In her testimony, Rebecca made the following points:
• Payday loans are designed to create a long-term debt trap.
• Payday loans cause borrowers severe harm, leaving them worse off than they were before the first payday loan.
• Payday loans were legalized only in relatively recent years based on the claim they would be used for emergencies, but they typically are not used this way.
• A few banks are payday lenders, posing severe consumer protection concerns and safety and soundness risk to banks. Without decisive regulatory action by all the bank prudential regulators, many banks will likely become payday lenders.
• Older Americans are particularly attractive to payday lenders and particularly vulnerable to the harm payday loans cause. Research has found that over one quarter of bank payday borrowers are Social Security recipients.
• Public policy is trending against payday lending, with a growing number of states—now 22, home to over 40 percent of Americans—prohibiting or significantly restricting it.
• Strong policy responses are critical to stopping the harm that payday lending causes.
The Payday Trap
69-year-old Annette Smith testifies about a $500 payday loan that ultimately cost her nearly $3,000.
Watch Annette's testimony.
Thanks to the California Reinvestment Coalition for providing assistance to Ms. Smith and calling attention to her plight.