EDITORIAL: ROUGH ROAD FOR LOAN LIMITSFebruary 28, 2010 (Editorial Board, The Memphis Commercial Appeal) They can pack a legislative hearing room with so many members and lobbyists there's no place for anyone else to stand. Their advertising campaigns are some of Tennessee's best. What some members of the short-term consumer loan industry do for their customers is not always so great. Setting up shop principally in poor neighborhoods, they collect interest and fees that, combined with loan rollovers, can drive their customers deeper and deeper in debt. The Tennessee General Assembly simply has a dismal record on this issue, and that failure is widening the gap between affluent Tennesseans and the poor. "It seems like it is a cause that has popularity in the community, but with the influence of money and heavy lobbying it's hard to get any traction at all," says Webb Brewer, who has represented consumer interests as director of advocacy for Memphis Area Legal Services. Today's Viewpoint cover story by columnist Wendi C. Thomas explores the abuses of income tax return lenders and other elements of an industry that enjoys one of the country's most favorable legal climates. Consumer-minded legislators have tried for years to rein in payday loan and auto title pledge loan purveyors and the like, advocating measures that are too often buried in summer study commissions or shelved in subcommittees. This year's efforts by legislators such as state Rep. Jeanne Richardson, Sen. Beverly Marrero and Rep. Johnnie Turner, all Memphis Democrats, are more modest, for the most part. But they would take some strides toward fulfilling the goals of Turner's late husband, Rep. Larry Turner, a champion of consumer protection, and others who have fought for the interests of poor and financially unsophisticated borrowers. One measure, for instance, would charge payday lenders a $2,500 fee to be applied toward a trust fund to pay for financial literacy education for adults. Other measures that could find their way onto the agenda this spring would: Prohibit predatory loans made over the Internet. Lower the interest rates allowable on payday loans from 400 to 100 percent. Award financial institutions that make short-term, low-figure, low-interest loans with state deposits. And encourage state employee credit unions to give short-term loans at reasonable rates. There is much more that could be done. Existing controls on payday lending prohibit a customer from borrowing more than $500 on more than two payday loans, but they are easily averted. In the tax refund industry, the practice of giving lenders the authority to divert their customers' refunds to other creditors should be curbed. Any progress on the issue will depend on whether Democrats who push the bulk of consumer protection measures can persuade Republicans to join them. Any progress on the issue could be a life changer for some of Tennessee's most vulnerable citizens.
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