Keep Payday Lending Out Of New York

Sarah Ludwig is a member of North Star Fund's Board of Directors and co-chair of our Community Funding Committee. She is the founder and co-director of Neighborhood Economic Development Advocacy Project (NEDAP), a North Star Fund grantee from 1995-2003.

Never underestimate the audacity of the financial services industry. As you read this, the payday lending lobby is shamelessly pushing a set of bills in Congress, under the pretense of "regulatory reform." The industry is desperate to continue its lucrative business, fearing passage of a 36% federal usury cap on consumer loans, which is gaining momentum in Congress.

Payday loans are small, short-term loans that carry triple-digit annual percentage rates (APRs) - a staggering 400% on average - and are structured to hook borrowers into a cycle of repeated refinancing and debt. Payday lenders' business model is to exploit working people who are struggling to get by from paycheck to paycheck. Lower income people and people of color have borne the brunt of payday lenders' exploitative practices. For example, the Center for Responsible Lending found that in California, payday lenders sap almost $250 million in fees from African-American and Latino communities each year.

Passage of a federal pro-industry payday lending bill would be especially harmful to New York, one of only a small handful of states that prohibits payday lending. So why are seven members of the New York Congressional delegation co-sponsors of payday lending industry bill, H.R. 1214? The bill was introduced by Rep. Luis Gutierrez of Illinois, once a vocal opponent of payday lending, but who not incidentally received his single largest campaign contribution last year from - you guessed it - a payday lender. The bill would allow payday lenders to charge upwards of 780% APRs on one-week loans, and 391% on two-week loans, and open the door in New York to a product that has been a scourge in states around the country that permit payday lending - including those that ostensibly regulate it.

Immediate action is needed: Send a loud message to the bill's co-sponsors from the NYC area, Reps. Gary Ackerman, Carolyn McCarthy, Gregory W. Meeks, José E. Serrano, and Edolphus Towns.

Urge them to withdraw their co-sponsorship of H.R.1214 and support the federal usury cap bill, H.R. 1608. Emphasize that payday lending is a harmful, usurious, predatory, exploitative product that is in fact prohibited in our state. Let them know that they must not open the door to payday lending in New York.

Contact NEDAP for more information on how you can get involved in organizing around this issue in New York, and find more on payday lending from the Center for Responsible Lending.