WASHINGTON — The Maryland & D.C. Credit Union Association wrote a letter to the District of Columbia City Council last week encouraging the council to extend its current 24% usury cap to cover payday lenders in Washington, D.C.
"A significant number of District residents are falling into the trap of the payday lending industry, which claims that payday loans are used only for emergencies and occasionally by consumers," MDDCCUA Chairman Wesley Bone and President/CEO Mike Beall wrote in a letter to the city council. "Neither is true based on the experiences as seen by credit unions. Payday lenders make significant profits only when consumers enter the payday loan cycle and stay within it obtaining back-to-back loans that rack up very high fees and APRs. The goal of every payday lender is to capture a consumer and keep them coming back for more loans when they cannot afford to break the cycle and pay the predatory loan off in full."
The two noted that the Federal Credit Union Act caps credit unions at 18% and the payday lending industry is discarding "the entire regulatory framework of the federal Truth-In-Lending legislation and regulation."
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The Payday Loan Consumer Protection Act of 2007 (Bill 17-132) would close the current loophole to the APR cap.
Bone and Beall also highlighted credit unions as a low-cost alternative for short-term funding, mortgages, and savings and checking accounts. "Credit unions have been recognized for years as consumer friendly financial institutions where consumers can get trusted financial information. With recent changes to federal law, every person who lives works and worships in the District of Columbia is eligible to join a credit union for as little as $5 to open an account," the letter read.
MDDCCUA represents 65 federally chartered credit unions headquartered in Washington, D.C. and a total of 180 area credit unions that have members living in the city including approximately 500,000 District
residents.
The association acknowledged that payday lenders are sending out "dire warnings" of losing this type of credit for consumers, but said credit unions were ready and willing to work with the council and residents to provide "fairly priced" options.
A final vote on the issue is expected Sept. 18.
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