Payday Loans Die In DC

In a victory for consumers, Washington D.C. effectively outlawed payday lending today with the passage of the Payday Loan Consumer Protection Act capping lending interest rates at 24%.

The bill was the focus of various lobbyist shenanigans, perhaps best encapsulated in the person of former mayor Marrion Barry, who, despite initially co-sponsoring the bill, today ended up casting the only vote against it. “”We are putting this industry out of business,” he said, concerned about the bills effect on they payday loan cartels and their employees.

Um, yeah, wasn’t that the whole point?

District of Columbia Passes Payday Lending Bill [CL&P Blog]

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  1. ColoradoShark says:

    This may easily backfire. You might notice DC is very close to some states where there are no such anti-usury laws. Anyone wanting a payday loan will go there. They will spend more time and money to get there. They may have trouble getting back to make payments and throw themselves into default.

  2. tentimesodds says:

    How is outlawing an option for consumers who might not have any other options pro-consumer?

  3. hypnotik_jello says:

    @tentimesodds: No options? Seems unlikely. If you can’t pay your bills on time you should look at why. And if you have outstanding bills you should look into a payment plan.

    It makes no sense for people to pay 600% in interest at all.

    These people probably have bad credit, and these payday loan operations aren’t helping them get out of debt. They’re almost assuredly better of negotiating some sort of payment plan with their creditors than getting payday loan.

  4. They can’t stay in business charging 24% interest? Isn’t that still more than credit card interest?

    @tentimesodds: They aren’t actually outlawing it, they’re capping the interest.

  5. tentimesodds says:

    @hypnotik_jello: It makes perfect sense if people WANT to pay 600% annualized interest on a two-week loan. Do you think they should charge 50 cents? Come on. You can’t quote payday loans in terms of APR because they aren’t designed to be held over the long term.

    This is an option in the market that is taken away by legislators that think they know better than the people. And that is dangerous.

    @Rectilinear Propagation: Credit cards often revolve for months or years–these are very short-term advances, so a higher APR is inevitable. You can’t pay the overhead required to run a business if you lend a few hundred dollars for two weeks at the same rate as a behemoth credit card company. And they are outlawing an option that people should be able to seek, if they choose–there are people who will be shut out of payday lending because of the rate cap. It’s simple economics.

  6. hypnotik_jello says:

    @tentimesodds: Yeah, but most people get trapped by it, that’s the problem. It’s not like they just use the payday loan service once or twice, but they get so bogged down from payment to payment. That’s the problem with it. It makes is neigh impossible for these people to get out of the hole that they’ve gotten themselves into.
    Usury loans exist for a reason.

  7. tentimesodds says:

    @hypnotik_jello: So you should tell people what they can and cannot do to protect them from themselves?

  8. infinitysnake says:

    @tentimesodds: The same reason it was pro-consumer to outlaw other forms of loansharking.

  9. tentimesodds says:

    @infinitysnake: If there’s no fraud, why should the government restrict the ability of private citizens to make lending contracts?

  10. cashmerewhore says:

    There’s already some act (law, whatever) that prohibits payday lenders from extending loans to active military and their dependents.

    Everybody runs into a little bit of a financial bind atleast once in their life. If it is something that can be fixed in a two week time, and won’t result in re-writing the next day, then I see little problem with it.

    It’s easier than swallowing your pride and asking your family.

  11. kweee says:

    Hahaha, D.C. banning something is like Rhode Island doing the same. You just walk five feet to the next state and it’s legal there.

  12. frogman31680 says:

    I’ll admit, I got caught up in this because it looked like such an easy fix to a big problem. Everyone was so nice and was able to give me as much as I needed.

    Problem was, I couldn’t live without my paycheck that I was REQUIRED to give up in 2 weeks. So, I ended up going back over and over and over again. $60 every 2 weeks for a year and a half. By the time I found a way out, I paid out more than I would have in late fees probably a hundred times over.

    This is not an only way out for consumers. This is the equivalent of heroin to people that are in dire need.

  13. dandd says:

    I know a guy who got into the hole with one of these places. He eventually “borrowed” (and never paid back) money from a friend of his to get himself out of debt with Payday.

    Once he gets out of debt, he jumped right back into Payday less than a month later.

    I look at 600% interest as a “stupid tax” and there is nothing wrong with that. As much as some people want to, we can’t save everyone from themselves. Some people are poor, stupid and will never change.

  14. loueloui says:

    @tentimesodds:

    These are bad loans made to people who don’t know any better. This is not a service for the public good, these people are legal loansharks out to victimize their ‘customers’. It doesn’t take a genius to sort that out.

    I am quite opposed to excess legislation, but there is the potential for these outfits to cause great financial harm to these people. I think it is a vested interest in government to intervene when that threat exists, not to interfere with the market, but to protect its citizens falling victim to these schemes.

  15. Shred says:

    Yay!! People who are against this outlawing are people who never used those damn payday loans! They suck, suck, suck!

  16. aikoto says:

    This is awesome! Let’s hope it spreads :)

  17. lmedsker says:

    Anyone who says “24% APR is more than credit cards charge” has no idea what a payday loan is. It’s a two week loan, not an annual loan. In DC, the fee per $100 (by law) was $16. There was a reason that 700,000 people in the DC area used them last year (I saw that number somewhere). People use payday loans to avoid bounced check, overdraft and late bill fees. Banning payday loans won’t help a single consumer, it will just force them to pay the more expensive fees that they used to avoid.

  18. lmedsker says:

    And for those that care…a 24% APR cap means that lenders can still offer payday loans in DC…it’s just the max they can charge is 92 cents per $100 loaned. So, all of you people who think 24% APR should be enough for payday lenders, now’s your chance to get into the business.

    The Goodwill’s Goodmoney program (Google it) offers payday loans at a break-even rate of $9.90 per $100 (equates 252% APR). So, even a tax-free charity won’t be able to offer payday loans in DC.

  19. @lmedsker: I know what a payday loan is. Do you have any data to show that most of these loans only go on for two weeks? Because all you ever hear about is how people end up stuck in these things for long periods of time.

  20. mbrutsch says:

    @tentimesodds: Because this is America, where everyone is a child who needs the Holy and Beneficient Government to look out for their well-being.

  21. CumaeanSibyl says:

    I’ve never used a payday loan, and my credit’s good enough that I don’t think I ever will. So why should I care if they get run out of business? Where’s all this outrage coming from? I hardly think eliminating your “right” to take out a ridiculously unfair loan is a sign of Mommy Government. Plus, isn’t it to everybody’s advantage to prevent people from racking up huge amounts of debt?

    Sometimes I feel like people think the poor ought to be punished for not having money, like it’s always and forever 100% their fault. “Let them have payday loans — so what if their lives will be ruined? It’s their fault for not having better jobs, buncha lazy bastards!”

  22. RagingBoehner says:

    Does this outlaw fees too? I mean, couldn’t you say that a 2 week
    $500 loan costs $5 in interest (based on the 24% APR) but there’s a $10
    (or $20 or whatever) application fee?

  23. Elvisisdead says:

    VA isn’t far from the same measures, either.

  24. ukthom says:

    The issue around payday loans goes a lot deeper than how intelligent the borrower might be. I have used payday loans to avoid fees leveraged by my bank, my credit cards, or to make that emergency repair on a car. Sure, I knew what I was getting into, with the triple-digit interest rate, and for me, there was a deep sense of shame for having signed up for such a loan, but the fact of the matter is, it bridged the gap between available funds, and made things a bit easier.

    I would even go so far to say that those people who support banning Payday Loans have never had to live check to check, or check to ???, and have never had to make the choice between food for the kids, gas for the car, or paying the heat bill in a New England January.

  25. Anonymous says:

    Let me tell you something alright? Leading up to the time that we had to take out a cash loan, we didn’t see anything but negative remarks from others online about the cash loan industry. We ended up almost losing our car because we waited. At the last minute, we borrowed $400 from cashloancity.com and I really believe it is the only thing “at the time” that saved us. I understand that there’s a problem with some people abusing this industry and crying about it later, but what about the people that really need it and pay it back on time? We’re even getting ready to have a positive mark on our credit because of it. Why are the people that never need this type of loan the same people that keep others from being able to get one?

  26. shotn222 says:

    I don’t think people attacking this payday loan practice are considering what these loans do for lesser income families. Maybe they should live a year in their shoes, or do something about the economy. How expensive is it to live in DC? Or for that matter, the ‘burbs’? I live in Virginia, just outside of DC, and let me tell you, it’s damn expensive. We downgraded from a 4 bedroom, lakefront house in PA, to a 2 bedroom apartment, got rid of one car, and have made adjustments to get by, and we make decent money between the two of us. We live paycheck to paycheck, not wanting to get head over heels in credit card debt, and have used payday loans on occasion, to help long term debt, or for emergency funds. I personally think the banks, insurance companies and credit card companies are the real crooks, and this is just a tool to steer people back into the long term revolving trap they have set for middle class America. Go ahead and overdraft your bank account by $1.00, and see the rates THEY charge, $36 dollars? And we’re not screaming about this? Not to mention they have developed a system to maximize this larceny, with the Governments blessings, by not posting in chronological order, which would make sense, but to re-adjust their postings to charge as much as possible. If a payday loan helps people get by, that is THEIR decision. What’s FREE America coming to? Focus on the Big Bank Mortgage Robberies and the over-inflated long term loans like autos & credit cards at a disgusting 30%, and stop punishing people who aren’t the rich & famous.