WSLC Reports Today
Updated DAILY... Almost Every Day™ by 9 a.m.

Links are functional at date of posting, but sometimes expire. Some links require free registration.  WSLC Reports Today links to stories of interest to organized labor; some positive, some negative.  The intention is to inform.

THURSDAY, FEB. 1  ▪  Consumer protections needed for predatory payday lending
▪  In today's Seattle P-I -- Rational lending (editorial) -- The Legislature should return some rationality to the payday lending practice with a cap of 36% interest on loans that target hard-working, financially squeezed segments of the population. The industry says it can't operate on such a tight margin; if so, perhaps it will be just as well for the public.
▪  In today's Oregonian -- Four bills target payday lenders in Oregon

THURSDAY, FEBRUARY 1, 2007
Consumer protections needed for predatory payday lending

In 2006, delegates representing the affiliated unions of the Washington State Labor Council, AFL-CIO unanimously approved a resolution in support increased consumer protections against payday lending and to make the issue one of the WSLC's legislative priorities in 2007.  Specifically, the unions called for "reforms such as longer minimum loan periods and installment payments for consumers, caps on annual percentage rates of interest, banning payday lending through the Internet to prevent out of state lenders from getting around Washington law, and further banning mandatory arbitration clauses in payday lending contracts."

Following is a report on payday lending written for OPEIU Local 8's newsletter by Ligia Velazquez, a WSLC Vice President representing the Labor Council for Latin American Advancement:

Ten years ago, Washington lawmakers legalized the payday lending industry in our state and it has grown into a $1.4 billion enterprise. For working families in crisis, whether because of emergency healthcare costs or unexpected car repair bills, payday lenders’ promise of quick cash and no credit check is enticing. In reality, these short-term loans come at a high cost for workers who are already living paycheck to paycheck.

Payday lenders offer small loans carrying typical interest rates of 391% (APR) to people desperate for quick cash and willing to put up their paycheck to get it. The high fees and interest rates associated with payday loans often lead to an inescapable cycle of debt for the borrower.  The standard payday loan in Washington is made for 14 days and, when the loan comes due, the amount of the loan plus a fee is due all at once.

Prior to 1995, financial institutions wishing to make small loans in Washington State were required to cap annual interest rates at 25% with a 4% loan origination fee. However, in 1995, Washington State legalized payday lending, exempting the industry from usury or small loan rate caps, thus giving them preferential treatment. We need to close the payday lender loophole and make payday lenders follow the same laws that other financial institutions are already following.

Payday lending is still illegal in 11 states. Georgia and North Carolina have banned the industry because of the negative impacts on consumers. Last fall, the Republican Congress recognized that predatory payday lending was such a problem that they capped the interest rate on payday loans at 36% for military families. We would like to see those same consumer protections extended to all working families in our state.

Everyone, regardless of their income or ethnicity, has the right to fair and reasonable consumer protections when they borrow money. It is time that Washington lawmakers took action to rein in payday lenders and provide fair and reasonable consumer protections.

Call your legislators and the Governor at 1-800-562-6000 and tell them to support House Bill 1020 because we need the following consumer protections:

-- Capping the annual interest rate at 36%;

-- Providing consumers with longer loan periods, allowing them the opportunity to repay the first loan;

-- Eliminating post-dated checks as the means for securing a loan;

-- Banning out-of-state lenders from making internet based payday loans; and

-- Eliminating mandatory arbitration clauses from payday consumer contracts.