Bankers Worry About Predatory Lending Law
RENEE MONTAGNE, host:
On Fridays, we focus on your money.
Today, cracking down on payday loans. A new law designed to protect military families from predatory lenders is under fire. Some bankers want Congress to reconsider the measure, which was signed into law last week.
NPR's Scott Horsley reports.
SCOTT HORSLEY: The new law caps the interest rate that payday lenders and others can charge military families at 36 percent. Military leaders press for the crackdown. Mike Calhoun, who heads the Center For Responsible Lending, says payday loans with interest rates of 400 percent or more, have become a growing concern for the nation's fighting forces.
Mr. MIKE CALHOUN (Head, The Center For Responsible Lending): The base commanders found that many families were getting trapped in payday loans, and that was supposed to burden for the families, and a distraction for the soldiers in carrying out their duties, service members who are actually losing their security clearance because of having these debt problems.
HORSLEY: One big payday lender, Advance America, has already stopped making loans to the military. And an industry trade group warns lenders can't afford to make small loans if interest is capped at 36 percent. Calhoun is not too worried.
Mr. CALHOUN: Even high priced credit cards have interest rates well below 36 percent. So there will still be plenty of credit available.
HORSLEY: Some mainstream banks are concerned the new law could affect them, if late fees were to be treated as interest for example. Calhoun argues, those concerns can be addressed through rule making, and says there's no need to reopen debate in Congress.
Scott Horsley, NPR News, San Diego.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.