[Congressional Record Volume 153, Number 104 (Tuesday, June 26, 2007)]
[Extensions of Remarks]
[Page E1415]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             INTRODUCTION OF PAYDAY LOAN REFORM ACT OF 2007

                                 ______
                                 

                             HON. TOM UDALL

                             of new mexico

                    in the house of representatives

                         Tuesday, June 26, 2007

  Mr. UDALL of New Mexico. Madam Speaker, I rise today to introduce the 
Payday Loan Reform Act of 2007. I want to thank original cosponsors 
Luis Gutierrez, Keith Ellison, and Janice Schakowsky for their support 
on this issue.
  Payday loans are short-term cash loans based on the borrower's 
personal check held for future deposit or electronic access to the 
borrower's bank account. These loans range in size from $100 to $1,000 
and average about 2 weeks in length. Finance charges can range from $15 
to $30 for a $100 loan and the average annual percentage rate on payday 
loans ranges from 390 to 780 percent for a 2-week loan. Let me repeat 
that: the average annual percentage rate on payday loans ranges from 
390 to 780 percent.
  It is well known that payday lending is rapidly expanding. In fact, 
at the end of 2006, the Center for Responsible Lending reported that 
the approximately 25,000 payday loan outlets in the country had an 
annual loan volume of at least $28 billion. These lenders charged over 
$4 billion in loan fees to consumers.
  All someone needs to get a payday loan is an open bank account in 
fairly good standing, a steady source of income, and a form of 
identification. Full credit checks, or even questions asked to 
establish if a person can afford to repay the loan, are rarely 
conducted. I believe lending that fails to assess a borrower's ability 
to repay, that requires consumers to write checks on insufficient 
funds, and that encourages perpetual debt is unacceptable.
  As such, we are introducing this bill today, which addresses 
important aspects of payday lending. First, it addresses ``rent-a-
banks,'' which are banks that partner with payday lenders to make 
single-payment and installment loans. These arrangements are designed 
to allow payday lenders to evade small loan laws in their respective 
states. This bill prohibits insured financial institutions from making 
payday loans, either directly or indirectly. Second, this bill 
prohibits payday loans based on checks drawn from depository 
institutions. Basing loans on personal checks that will be deposited to 
repay the loan on the next payday can be a key to the coercive 
collection tactics. This bill will prohibit the holding of a check as 
security for a loan and can help end these practices.
  Congress has enacted legislation to address the personal 
responsibility of lenders and while I believe that individuals must 
take greater responsibility for their debt, the lending industry must 
also be held accountable for targeting those individuals who are unable 
to payoff their debts. Last Congress, as part of the National Defense 
Authorization Act, we included language that provided these important 
protections to members of the armed forces. I urge my colleagues to 
support this legislation to ensure that these protections are given to 
all consumers.

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