I-Team: Payday Lenders Seek Weaker Regulations - 8 News NOW

I-Team: Payday Lenders Seek Weaker Regulations

Posted: Updated:

LAS VEGAS -- In the post-recession economy, many Las Vegans are living paycheck to paycheck, often turning to payday lenders to help make ends meet.

For some, those high interest loans lead to a crippling cycle of debt.

Nevada has no rules restricting the interest rate on payday loans -- 100 percent, 500 percent or 1,000 percent -- it's all legal.

But Nevada does have some state laws that protect consumers from predatory practices, unless the lenders get their way on Capitol Hill. .

There are more payday lenders in southern Nevada than McDonalds or Starbucks combined.

One out of every three southern Nevadans uses payday lenders, according to a recent survey.

"I couldn't make ends meet," said Jeannie Richard, a payday loan customer.

Richard is a single mother with multiple mouths to feed who lives paycheck to paycheck.

"It worked for a while, but as time goes by, you're paying every two weeks and every two weeks and the next thing you know, you're in to it with all the interest and the minute you can't pay it, boom, you're in trouble," she said.

In 2008, Richard borrowed $300 from Handy Cash Loan Center at an interest rate of more than 1,000 percent.

Richard said she repaid the principle many times over, but when she was laid off from her job of 22 years, she fell behind on the interest payments.

Dan Wulz with the Legal Aid Center of Southern Nevada represented Richard and nearly 300 others in a class action lawsuit against Handy Cash.

"You get on what's called the debt treadmill," Wulz said.

They won because the lender was charging more than Nevada law allowed.

"The law does allow a payday lender to charge whatever rate of interest that they're able to get a borrower to agree to, but after that, the law has a number of consumer protections," he said.

Those safeguards are now threatened by a bill to ease industry regulation, according to consumer advocates.

If passed, H.R. bill 6139 would create a federal charter for non-bank lenders, a move to override state laws in favor of weaker federal oversight, according to the Center for Responsible Lending.

"It would knock the legs out of the 50 states consumer protections and that's a recipe for disaster," said Kathleen Day for the Center for Responsible Lending.

The payday loan industry insists the legislation would provide for new products now prohibited by a hodgepodge of state regulations.

"The working people of America, what they need is to have access to credit and they have to have access to innovation," said Mary Jackson of Cash America. "We're hoping the legislation will allow for the nonbank sector to meet those demands."

For those who consider short-term, high-interest credit a financial solution, Richard warns, borrower beware.

The legislation is currently in the house but is not expected to go anywhere before Congress recesses for the year.

Consumer advocates worry it may find legs next term. So much so, that the director of the Legal Aid Center of Southern Nevada put it on Senate Majority Leader Harry Reid's radar in hopes that he will block any effort to pass it in the Senate.

According to OpenSecrets.org, contributions to lawmakers from the non-bank lending industry have increased significantly in the last few years. In 2010, the contributions hit an all time high of nearly $2 million.

Powered by WorldNow
All content © Copyright 2000 - 2014 WorldNow and KLAS. All Rights Reserved.
For more information on this site, please read our Privacy Policy and Terms of Service.