In response to our June newsletter I am going to post the article that attorney Snyder commented on:
The payday-loan industry sells its services to hard-up people in poor neighborhoods at steep prices, then fends off charges of profiteering with the cloak of capitalist virtue. It says it’s meeting a need, filling a niche. This is how loan sharks and bookies justify themselves, too, although in fairness what payday lenders do is not beyond the pale legally, just morally.
It’s a world of triple-digit annual interest rates, milking people’s desperation for a few hundred dollars until payday. Its customers all too often borrow money they can’t repay, falling into a trap of fees and bounced checks, taking new loans to pay off old loans, accumulating fees but never paying off principal. You’d never go near these lenders unless you really thought you had to.
Or unless you were Senator Christopher Dodd, a Democrat of Connecticut and the chairman of the banking committee and self-styled champion of consumers’ interests. He somehow found himself last month having dinner at a sleek bistro in Washington with members of the Online Lenders Alliance, an industry group for payday lenders that troll for customers on the Web.
It was the first night of the alliance’s “Spring Conference & Blitz 2009,” and the question is about whether the group arranged the dinner for Mr. Dodd. He is running for re-election and has already raised more than $44,000 for his campaign from pawnshop owners and other high-interest lenders, according to The Los Angeles Times. The dinner on the alliance’s agenda was a “special event” featuring Mr. Dodd and a “special guest,” Senator Tim Johnson of South Dakota.
But when Arthur Delaney of The Huffington Post went there, he was told it wasn’t an alliance event, although some members would be there. Aides to Mr. Dodd and Mr. Johnson told us the same thing: Forget what it looked like, this was a private fund-raiser by Mr. Johnson for his friend Mr. Dodd, not payday lenders wooing a senator whose committee was considering a bill that could seriously cramp their business.
That bill, sponsored by Senator Richard Durbin of Illinois, caps interest rates on consumer loans at 36 percent. That’s the reasonable limit that Congress placed on loans to members of the armed forces.
It should apply to all American families. Mr. Dodd, who was recently praised after Congress passed a bill limiting abuses by credit-card companies, should follow the same crusading impulse to go after the egregious exploitation of payday loans. He should avoid even the slightest hint that he is cozying up to it.