PROVIDENCE, R.I. – The Rhode Island Payday Lending Reform Coalition along with General Treasurer Gina M. Raimondo and Providence Mayor Angel Taveras today joined together with constituents and payday lending reform advocates to discuss how these predatory products are threatening the financial security of many hardworking Rhode Island families.
Rhode Island is the only state in New England that allows the practice of payday lending and in 2006 Congress banned lenders from issuing payday loans to active duty service members of the military and their dependents, capping the rate at 36 percent.
The Coalition is supporting legislation (House Bill 7257 and Senate Bill 2307) sponsored by Rep. Frank Ferri and Senator Juan Pichardo to cap the interest rate on payday loans at 36 percent APR. Currently, payday loans in Rhode Island carry charges as high as 260 percent APR.
"If Congress established a 36 percent rate cap for our military members and their families because of the economic hardship created by payday loans, then the General Assembly should provide the same protection to Rhode Island's citizens for the same exact reasons," said Margaux Morisseau of the Rhode Island Coalition for Payday Reform. "The Rhode Island Coalition for Payday Lending Reform appreciates Treasurer Raimondo and Mayor Taveras' support of the coalition's efforts."
"Far too many families are facing financial challenges that might be mitigated or avoided through a greater understanding of personal finance," Raimondo said. "I believe payday lending exploits that lack of understanding. My office is committed to developing alternatives that allow for responsible borrowing because access to fair, low cost financial products is critical to our state's overall economic recovery."
"Payday loans are debt traps that harm many Rhode Islanders struggling to keep their heads above water by catching them in an unintended cycle of high-interest, long-term borrowing," said Mayor Taveras. "It's time for Rhode Island to join our fellow New England states in reducing the interest rate that many payday lenders charge and addressing the most concerning aspects of payday lending practices."
The Coalition also released the results of a statewide payday poll during the event at the West Elmwood Housing Development Corporation that found Rhode Islanders support reforming the state's current payday lending law. Seventy six percent of Rhode Islanders polled said they support capping payday loan interest rates; 98 percent of those polled said they intend to vote in November and 63 percent said they would be more likely to vote for a candidate that supported a rate cap on payday loans.
"For far too long, Rhode Islanders have been exploited by predatory loans to low-income and working families. This is the time to stop this practice and protect consumers in these hard economic times," said Senator Pichardo.
"Rhode Island must address the issue of payday lending in order to improve the economic health of our state," said Representative Ferri. "It is simply unacceptable to have a 260 percent APR."
According to the Center for Responsible Lending, the average payday borrower takes out nine payday loans a year. This debt trap would be significantly reduced if Rhode Island joined its fellow New England states in reducing the interest rate to a more reasonable 36 percent – the same rate that payday lenders are allowed to charge in New Hampshire, and currently the highest interest rate that payday lenders are allowed to charge in New England outside of Rhode Island.