[Congressional Record Volume 152, Number 23 (Tuesday, February 28, 2006)]
[Senate]
[Pages S1530-S1531]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       HAWAII CREDIT UNION LEAGUE

  Mr. AKAKA. Mr. President, every year, members of the Hawaii Credit 
Union League meet with me during their trip to Washington, DC. They 
keep me abreast of their work in Hawaii by providing affordable 
financial services to their members. I would like to recognize credit 
unions and other mainstream financial services organizations that 
provide access to financial services that improve the lives of their 
members. Without credit unions, even more of our constituents would be 
susceptible to predatory lending and high-cost financial services. For 
example, individuals that lack credit union or bank accounts are 
considered to be unbanked. The unbanked rely on alternative financial 
service providers to cash checks, pay bills, send remittances, utilize 
payday loans, and obtain credit. However, their earnings are 
unnecessarily diminished in the process by their reliance on these 
high-cost, and often predatory, financial services. These hardworking 
families can ill-afford this hit to their paychecks. Not having a 
credit union or bank account prevents families from being able to save 
securely to prepare for the loss of a job, a family illness, a down 
payment on a first home, or education expenses for their children.
  I am proud that we have credit unions in Hawaii that provide 
innovative services to more effectively meet the needs of their members 
such as offering payday loan alternatives to members of the armed 
services. Payday loans are small cash loans repaid by borrowers' 
postdated checks or borrowers' authorizations to make electronic debits 
against existing financial accounts. Typically, the principal for 
payday loans is in the range of $100 to $500 with full payment due in 2 
weeks. Finance charges on payday loans are normally in the range of $15 
to $30 per $100 borrowed, which translates into triple digit interest 
rates of 390 percent to 780 percent when expressed as an annual 
percentage rate, APR. A common practice is loan flipping, which is the 
renewing of loans at maturity by paying additional fees without any 
principal reduction. This practice often creates a cycle of debt that 
is hard to break. Furthermore payday lenders often locate near military 
bases because they know that a military servicemember's government 
paychecks represent a reliable source of fees and military personnel 
may be court marshaled or dishonorably discharged for failing to repay 
their debt.
  I am proud that the Windward Community Federal Credit Union in 
Kailua, on the island of Oahu, has developed an affordable alternative 
to payday loans. I commend the staff of the Windward Community Federal 
Credit Union for their outstanding program which benefits the marines 
and other members that they serve. I have introduced legislation that 
would encourage credit unions and other financial institutions to offer 
this sort of low-cost, short-term credit product. S. 1347, the Low-Cost 
Alternatives to Payday Loans Act, would promote low-cost alternatives 
to payday loans by authorizing the Secretary of the Treasury to award 
demonstration project grants. I will continue to work with my 
colleagues on the Banking, Housing, and Urban Affairs Committee to 
enact this important legislation.
  I also have included efforts to increase access to credit union and 
bank accounts in an attempt to combat refund anticipation loans, RALs. 
While the earned income tax credit, EITC, helps working families meet 
their food, clothing, housing, transportation, and education needs, 
EITC refunds are unnecessarily diminished by excessive use of RALs. 
Interest rates on RALs can range from 97 percent to more than 2,000 
percent. Considering the low repayment risk of this type of loan, the 
interest rates and fees charged on this type of product are not 
justified. Often, those who take out RALs are lower income families for 
whom these costs are a particular burden.
  I have introduced the Taxpayer Abuse Prevention Act, which would 
restrict predatory practices associated with RALs and expand access to 
mainstream financial services. The bill would expand the eligibility of 
electronic transfer accounts, ETA, which are low-cost accounts at banks 
and credit unions intended for recipients of certain Federal benefit 
payments, to include EITC benefits. These accounts will allow taxpayers 
to receive direct deposit refunds into an account without the need for 
a refund anticipation loan. Additionally, my bill would mandate that 
low- and moderate-income taxpayers be provided opportunities to open 
low-cost accounts at federally insured banks or credit unions via 
appropriate tax forms. Providing taxpayers with the option of opening a 
bank or credit union account through the use of tax forms provides an 
alternative to RALs and immediate access to financial opportunities 
found at banks and credit unions.
  In addition, I have worked with my friend, the Senator from New 
Mexico, Mr. Bingaman, on the Taxpayer Protection and Assistance Act. 
The legislation includes a provision that authorizes a grant program to 
link tax preparation services with the opening of a bank or credit 
union account. This will help encourage the estimated four million 
unbanked EITC recipients to establish a relationship with a mainstream 
financial institution. In turn, they will no longer be forced to pay 
the excessive fees RAL providers assess. Once the previously unbanked 
have established a credit union or bank account, they will be able to 
benefit from the wide range of financial services that mainstream 
financial institutions provide.
  I will continue to work to expand access to mainstream financial 
institutions so that more individuals can benefit from lower cost 
opportunities found at credit unions and banks. I thank the 
representatives from the Hawaii Credit Union League for all of their 
work in providing financial services and increasing the financial 
literacy knowledge of their members. I also will continue to work to 
enact legislation that promotes the utilization of the services of 
credit unions and banks so that even more people can improve their 
lives by having access to

[[Page S1531]]

low-cost accounts, cheaper remittances, less expensive loans, and 
insured savings accounts.

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