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Other Voices: Don’t repeal payday lending rules

To its credit, North Carolina was a national leader in saying no to the payday lending that takes advantage of people who struggle to get by from paycheck to paycheck.

Payday lending has been illegal here since the General Assembly passed a law banning such businesses in 2001.

So why would members of Congress from North Carolina be pushing a resolution to repeal a new federal Consumer Financial Protection Bureau rule imposing limits on payday lending and other forms of predatory short-term, high-interest loans?

The answer to that question is that there is no good reason.

Yet Mark Walker of Greensboro and Ted Budd of Advance, as well as Richard Hudson, Patrick McHenry, Robert Pittenger and David Rouzer, are all sponsors of the resolution.

One motivation no doubt is lobbying from the payday lending industry, which is worried about losing its ability to rake in thousands of dollars in interest and fees from people who can’t afford to pay them.

In 2001, North Carolina leaders of both parties banned payday lending, because they knew it was cruel and harmful to those who could least afford it.

The concept of payday loans is attractive to people who run into problems when they have little extra money in the bank.

The idea is to give people relatively small loans at high interest rates that will be paid off as soon as the borrower gets paid, usually in a couple of weeks.

Too often, though, borrowers find they can’t pay the loan when payday rolls around, so they fall into a trap of taking new loans or rolling old ones over, while the interest — at rates of 400 percent or higher on a yearly basis — mounts up to more than the original loan.

What’s supposed to be a loan of a few hundred dollars paid off within the month can amount to thousands of dollars in debt before it’s paid off years later.

North Carolina was a particular target of these lenders because of the large number of troops and veterans around the state’s many military bases.

Even with the state’s ban, internet payday lenders are still able to prey on consumers here.

The rule under attack now requires that those who make payday loans, loans on car titles and similar loans verify that their customers can afford to repay them.

It also caps the number of times someone can take out successive loans.

That seems reasonable, but the industry says the rule would run many payday lenders out of business.

If that’s the case, they shouldn’t be in the business of preying on people who can’t afford their loans.

Opponents of the resolution fear that repeal would encourage predatory payday lenders to find loopholes so that they can operate in this state again.

That’s what happened for several years after the 2001 ban was enacted, and it took court cases to shut the industry down here.

Currently, lenders can make short-term loans, but the interest rate on small loans is capped at 30 percent.

North Carolina is better off when payday lenders can’t take unfair advantage of working people who find themselves in a bind.

Our representatives should be supporting rules that extend needed protections to more consumers, not undermining the progress the state has made.

— Winston-Salem Journal

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