Pay Day Loans Threatened By New Bill<

If Senate Bill passes, 50 million people will have nowhere to go for short term loans such as pay day loans, according to SaveMyPawnShop.com

Senator Durbin introduced bill S. 500: "Protecting Consumers from Unreasonable Credit Rates Act of 2009" which would cap consumer interest rates at 36 percent. Although this sounds reasonable, it would also apply to short term loans like pawnshops. Under a 36% rate cap, when someone borrows $100 and then repays the loan two weeks later, the customer will pay $1.38 in interest on the loan. That amount of money is not enough to satisfy the Pawnshop’s employee wages, storage, and paperwork costs associated with the loan.

While trying to shut down the Payday loan industry, Senator Durbin is about to destroy the 3,000 year old pawnshop business. Thousands of satisfied customers of pawnshops have signed a petition on SaveMyPawnshop.com to tell Senator Durbin: ‘Thanks for lowering my interest rate, but you will put the pawn shop out of business”.

Pawnshops are seeing records amount of traffic to their stores, spurred by high unemployment and the crippling 17 month recession. However, many of these stores might be forced to close if a new senate bill is signed into law.

Millions of people rely on pawnshops to pay for unexpected hospital bills, car breakdowns, and other unforeseen expenses. If you talk to customers of a pawnshop, they will tell you that pawnbrokers are the only lenders willing to loan them money. In fact, during the great depression, the pawn shop was the only functional lender.

If pawn shops begin to close, who is going to provide these former pawnshop customers with the loans they need? The government (with yet another bailout)? A bank? In these tough times, banks are reluctant to loan money to consumers with good credit.

SaveMyPawnshop.com is asking Senator Durbin to reconsider this bill or at least talk to customers before shutting down pawn shops.

State officials across the nation and consumer advocates say it's impossible to estimate the size of this unregulated industry. But, they suspect that it involves thousands of Web pages generating billions of dollars in revenues nationwide.

Regulated payday lenders, who operate from storefronts, collect about $8 billion a year in interest and fees on $50 billion in loans, according to industry sources.

In August 2006, the California Department of Corporations moved against the unlicensed lenders by issuing a "desist and refrain" order against four Internet payday loan operators, accusing them of violating California law.

Among other things, the law requires that the businesses be licensed by the state, loans be capped at $300 and interest limited to an annualized percentage rate of 459 percent for a maximum 31-day period.

Since then, the order has stalled in state courts over the sovereign immunity issue.

"Internet lending in general is something we've tried to get our arms around, and the tribal issue is a further complication," Corporations spokesman Mark Leyes said. "Any California customer, who is dealing with these lenders, is not enjoying the consumer protections that are in state law."

For further details read the news source: huliq.com

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