Congressman Davis touts his payday loan proposal
September 20, 2006 - Frankfort, Kentucky
Northern Kentucky Congressman Geoff Davis, who has become embroiled in a debate over limiting predatory lending practices, says his proposal goes further than the "knee-jerk reaction" amendment he opposes. Davis, an Army veteran and freshman congressman from Hebron, has been criticized by consumer rights groups for opposing a 36 percent cap on payday loans. Calling the idea "knee-jerk legislation," Davis said the 36 percent cap would drive payday lenders out of business and send customers into the arms of other predatory lenders whose loan amounts aren't limited to the typical $500 and $700 maximum of payday lenders. Installment loan lenders can give loans for as much as $5,000 to individuals who typically end up rolling over the loan, generating more interest, because they can't afford to pay it back. Davis spokesman Justin Brasell said the congressman's proposal would allow payday lenders to charge the fee they are charging up front now -- about $30 per $200 on a two-week loan, which rolled over through a year would calculate to an annual interest rate of 390 percent -- but would prohibit lenders from rolling over the loans if the customer can't pay. In such cases, Davis' measure would require lenders to set up customers on a six-month payment plan with an interest rate capped at 20 percent annually, Brasell said. Consumer rights advocates say they don't dispute there are flaws within the installment loan industry, but that isn't a reason not to rein in payday lenders. "There are problems in the small installment loan market as well," said Jean Ann Fox, spokeswoman for the Consumer Federation of America, a group that has been pushing the amendment Davis opposes. "A 36 percent rate cap as the outside limit, that may be high but that certainly is a vast improvement over 390 percent payday loans." The issues are part of the annual spending bill for the Department of Defense. A conference committee made up of House and Senate members, including Davis, is debating his proposal and the amendment he opposes. Beyond the interest rate issue, Davis said his proposal calls for other regulations to curb predatory lending to military personnel, including: + Prohibiting lenders from garnisheeing the salaries or wages of any active duty service members. + Prohibiting lenders from contacting or threatening to contact the borrower's commanding officer to collect a debt. + Prohibiting lenders from representing themselves as being endorsed by the military. + Preventing lenders from collecting debt while a borrower is deployed overseas. "We're going to get this done," Davis said. "We're going to get a true credit protection issue done." Payday lending executives have given Davis $11,450 for his race this year against Democrat Ken Lucas, according to an analysis by the Center for Responsive Politics. Davis said that as a member of the House financial services committee, a wide spectrum of financial services executives contribute to his and other members' campaigns, much like they did for Lucas when he was in Congress. Brasell said he expects the issue to be resolved this week.
News Source
The Cincinnati Post, Staff Writer
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