Thursday, April 26, 2007

The District’s attorney general yesterday proposed legislation to limit high fees charged by financial businesses, such as those that provide payday advances, that cater to low-income customers.

Attorney General Linda Singer (pictured) said she plans to hold town hall meetings and work with D.C. Council members to introduce laws lowering interest rates that can reach almost 400 percent a year.

The targets of Singer’s ire were included in a 25-page report her office is expected to release today, “The High Cost of Being Poor in the District of Columbia.” They include check-cashing centers, rent-to-own facilities, payday loans, subprime mortgages, auto financing, tax refund-anticipation loans and international money wires.

In addition to imposing fee limits, Singer said she wants more transparency in loans so that customers can make comparisons and projections.

“We want to make sure consumers are treated fairly and they have the ability to make good choices in how they spend their money,” she said.

Many laws have been ineffective because of loopholes, said Singer, who met yesterday with council member Mary M. Cheh (D-Ward 3).

Cheh, head of the Public Services and Consumer Affairs Committee, said she will work with Singer to determine what type of fast cash advance legislation should be introduced. Cheh recently introduced a bill that would require mortgage lenders to disclose the total payments over a loan’s lifetime, including principal, interest, taxes and insurance.

“We can pass the laws, but we can’t enforce them,” Cheh said. “By linking together and proceeding against them, we can be much more effective.”

According to the attorney general’s report, minorities and low-income residents who are less likely to have bank accounts are among the biggest customers of easy payday loan firms that charge significantly higher fees than banks.

Check-cashing businesses charge fees up to 5 percent. Payday loan centers charge up to 10 percent of the loan, plus an additional $5 to $20. In effect, a no fax cash loan of just two weeks carries an annual rate up to 391 percent, the report said.

Low-income buyers pay up to 3.7 percent more on car loans, and African Americans pay up to 10 percent more, according to the report.

Money transfers wired by immigrants to family members out of the country can carry 4 percent fees.

Click here to read the rest of this Washington Post article.

This entry was posted on Thursday, April 26th, 2007 at 6:07 am and is filed under Washington.