Jeff Merkley Announces New Crackdown on Payday Loan Sharks

Slams Gordon Smith for Supporting Predatory Lenders, Calls for National Cap on Interest Rates

PORTLAND - House Speaker Jeff Merkley, candidate for U.S. Senate, announced a new plan to crackdown on payday loan sharks across the country, including a national cap on interest rates and tough new restrictions on loans sold over the internet. Merkley led the effort in Oregon to cap the interest rates at 36 percent on payday loans and place strict limits on check cashing fees.

Read more about Jeff Merkley's plan to restrict predatory payday lenders.

Republican Senator Gordon Smith has sided with the industry and voted against protecting families from predatory lenders. Predatory lenders go to great lengths to squeeze families for money even after the families have lost everything. In 2001 Smith voted against a proposal that would have invalidated claims by predatory lenders in bankruptcy court if the lender charged more than 100% interest. [Senate vote #28, 3/14/01]

"Gordon Smith turned his back on hardworking families and opposed new protections against predatory lenders," said House Speaker Jeff Merkley. "Enough is enough. It is time for leaders in Washington D.C. to stand up to the predatory lending industry, crack down on payday loan sharks, and protect hardworking families trying to make it. That is exactly what I will do in the U.S. Senate."

Merkley was joined by Oregon consumer advocates and Maryann Olson, who has multiple sclerosis and was forced to go to the local payday lender to gather enough money for specialized shoes she needed. Her situation quickly spiraled out of control and before she knew it she was borrowing from payday lender to pay back the other. Eventually Maryann ended up owing six payday lenders nearly $1,900, all for one pair of shoes.

As Oregon's U.S. Senator Jeff Merkley will:

1. Cap Payday Loan Interest Rates at 36% Nationally

Just as Jeff Merkley fought against predatory payday lenders in Oregon, so too will he take that fight to the U.S. Senate. Merkley will fight for a national 36 percent interest rate cap on these short-term personal finance loans. Such a cap is the only effective way to protect consumers from an industry that preys on our society.[1]

In 2007, the federal government placed a cap on payday loans to members of the military at 36 percent. This came after a Defense Department report said that payday "loans at 400% and up... and other harmful lending undermine troop readiness, morale, and quality of life."[2]

2. Restrict Payday Loans Made on the Internet

As Oregon and other states implement new consumer protections, predatory lenders are moving to the internet to evade new consumer protections. One such website marketer claimed that more than 70 million people used internet payday loans in 2003.[3] Because these companies are often licensed in states with little or no regulation of payday lenders, they can evade consumer protections.

Merkley will work to establish sweeping regulations to rein in predatory lending on the internet. Companies should not be allowed to skirt the laws of the states in order to perpetrate these scams on unsuspecting Americans and strip them of wealth. Jeff will work to limit direct, online marketing to consumers and to require that standardized products only be offered online.

3. Protect Families from Deceptive Practices

Merkley will require the Federal Trade Commission to crackdown on predators that use unfair and deceptive trade practices. Lenders should be required to inform customers what interest rates they will be required to pay, upfront, before the loan is entered into. Additionally, Merkley will call regulators' attention to the problem of "short-term balloon payments," which explode with a large unpaid balance at the end of a loan term; repeated refinancing; and misleading disclosures under the Truth in Lending Act.

Jeff Merkley spent his early years in Roseburg, Oregon, a community where the children of loggers and mill workers learned the value of honest work, good neighbors, and strong families. Jeff earned scholarships and became the first in his family to go to college. He went on to serve as a national security analyst, first for the Pentagon and then for Congress.

After returning to Oregon with his wife Mary, Jeff led Habitat for Humanity and worked with low-income families to rebuild neighborhoods and purchase their first home.

As our U.S. Senator Jeff Merkley will take on the special interests and fight hard for regular hardworking Oregonians. Husband to a nurse and father to two public schoolchildren, Jeff Merkley will deliver the change we need in Washington D.C.

He will bring Democrats, progressives, and independents together to defeat Gordon Smith and build a better nation for every child and family in Oregon - a future with family-wage jobs, affordable healthcare, a clean and healthy environment, and safe and thriving communities.

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[1] King and Parrish, Springing the Debt Trap, at 4.

[2] Department of Defense, Report On Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents, at 45, 8/9/06.

[3] Fox and Petrini, Consumer Federation of America, Internet Payday Lending: How High-priced Lenders Use the Internet to Mire Borrowers in Debt and Evade State Consumer Protections, at 6, 11/30/04.

Posted March 27, 2008
Press