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Thursday, July 31, 2014

Looking for high-interest loans? Electeds can help

By Adam Wisnieski
Posted

 

Assemblyman Carl Heastie, head of the Bronx Democratic County Committee, and state Sen. Jeff Klein are supporting legislation that is under scrutiny because both men have received thousands of dollars in contributions from a group pushing the bill.

In January, Mr. Heastie introduced legislation that would authorize licensed check-cashing establishments to give short-term loans under certain circumstances. It was picked up in the Senate by state Sen. Hugh Farley and was co-sponsored by Mr. Klein. New York State has a 25 percent cap on these types of loans and this bill would not exceed that. It would, however, institute a series of fees and fines that would greatly exceed that 25 percent rate. Gov. Andrew Cuomo’s administration is adamantly against the legislation, saying it preys on poor people and would effectively hit people with triple-digit interest rates.

“Short-term payday loans are marketed to low- and middle-­income consumers as a source of emergency income that can be paid off quickly. Consumers who turn to these loans for relief, however, often end up in a cycle of borrowing that leaves them far worse off as a result,” Benjamin Lawsky, the state’s superintendent of Financial Services, wrote in a letter to Speaker Sheldon Silver.

Mr. Lawsky argues people in need of short-term small-dollar emergency loans can go to credit unions and banks.

“The proposed legislation would roll back longstanding and effective consumer protections and would expose consumers to loans made by entities not regulated for their safe and sound lending operations,” Mr. Lawsky writes.

Mr. Klein did not respond to a call for comment.

Mr. Heastie argues that people with bad credit ratings who are not members of credit unions have no other choice but to turn to online payday loans with high interest rates. He said with websites taking advantage of people in need, he’s proposing another way for people to secure short-term loans. 

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