For Immediate Release:
Contact:
Wednesday, June 27, 2007
Jean Ann Fox, CFA, 757-867-7523
Lauren Saunders, NCLC, 202-452-6252
Edmund Mierzwinski, USPIRG, 202-546-9707
Josh Nassar, CRL, 202-349-1865
Consumer Groups Applaud Legislation to Halt Check Kiting for Loans
-Representatives Udall and Gutierrez Introduce Payday Loan Reform Act of 2007-
Consumer and community organizations threw their support behind a federal bill that
would stop payday lenders across the nation from trapping borrowers in loans by holding their
personal checks or securing electronic access to their bank accounts. Rep. Tom Udall (D-NM)
and Rep. Luis Gutierrez (D-IL) introduced the Payday Loan Reform Act of 2007 to prohibit
lending based on checks or debits drawn on depository institutions. Rep. Keith Ellison (D-MN)
and Rep. Janice Schakowsky (D-IL) are also sponsoring the bill. Last year Congress enacted this
protection for Service members and their families.
Payday loans are cash advances that cost 390 to 780 percent annual interest and must be
repaid in full on the borrower’s next payday. Every payday loan is secured by either the
borrower’s personal check for the full amount of the loan plus the finance charge, which is held
until the next payday, or by authorization to electronically access the borrower’s bank account to
withdraw funds on the next payday. Though these loans are marketed for short-term use only,
only one percent of all loans go to the one-time, emergency borrower.
“Under this protection, lenders will no longer be able to entice cash-strapped families to
write checks without money in the bank as security for quick cash advances,” stated Jean Ann
Fox, Director of Consumer Protection for Consumer Federation of America. “Internet lenders
will not be able to hi-jack consumers’ bank accounts to repay loans.”
“Improving the ability of low-income Latino families to build wealth depends, in part, on
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