DURHAM, N.C., March 28 /PRNewswire/ -- A lawyer at the Center for
Responsible Lending (CRL) will testify tomorrow before a subcommittee of the
U.S. House of Representatives' Committee on Small Business on how payday
lenders prey on military personnel.
The Subcommittee on Rural Enterprise, Agriculture and Technology meets in
Kansas City, Missouri amid newspaper reports on service members victimized by
payday lenders, who often get their customers trapped in loans running into
more than 400 percent interest.
Kathleen Keest, a lawyer for CRL, will tell the legislators that predatory
payday lending costs Americans over $3.4 billion in excessive fees and that
military personnel are prime targets for this abusive product.
"Military families are the ideal targets," Keest will testify. The
reasons: The typical private first class makes less than $17,000 a year. Many
military families are young, typically without much experience in managing
finances and without a cushion of savings to help them through emergencies.
"It is easy to see how soldiers would find a need for quick cash in these
circumstances," Keest will testify before the subcommittee, chaired by Sam
Graves, a Missouri Republican. "What is less obvious, but even more
compelling, is the difficulty of escaping the debt cycle once the soldier is
in it."
Payday lenders typically take a postdated check from a borrower for the
amount borrowed plus a fee, payable on the next payday. Borrowers can get
caught in a cycle of debt in which they continue to make huge interest
payments on the same debt.
Soldiers can also be jailed or discharged for not repaying debt, and
payday lenders have threatened to report soldiers who fall behind to their
commanding officers.
Keest will tell legislators that Congress should bar payday lenders from
repeatedly rolling over loans, collecting interest again and again on the same
amount. The loans should have 90-day terms, not the usual two weeks, and
payday lenders would be required to consider whether borrowers actually can
repay their loans, among other solutions.
These fixes will help all payday borrowers, not just service people, avoid
sinking into a cycle of debt from which they may not be able to escape.
For more information: Michael Flagg at 202 349-1862 or
mike.flagg@responsiblelending.org.
About the Center for Responsible Lending
The Center for Responsible Lending is a nonprofit, nonpartisan research
and policy organization dedicated to protecting homeownership and family
wealth by working to eliminate abusive financial practices. CRL is affiliated
with Self-Help, one of the nation's largest community development financial
institutions. Both are based in Durham, N.C. CRL helped write the North
Carolina predatory lending statute, the first such law in the nation.
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