Mark Winston Griffith

News from the Consumer Justice Front

Let’s take a break from the subprime crisis for a moment to check in on other credit issues affecting low income and working-class people.

Payday Lender Watch
In a development New Yorkers should pay close attention to, the Washington Post reported that the payday loan industry is aggressively going on the offensive to block attempts by local Washington D.C. lawmakers to shut down payday loans in D.C. Payday loans are exploitatively priced short term loans, often secured by an anticipated pay check, which are routinely rolled over numerous times and trap the borrower in a cycle of debt. For the moment at least they are illegal in New York State because of strong state usury laws.

Using television advertisements to affect the result of an upcoming DC Council vote that will decide the fate of payday lending, the payday lenders are trying to soften their image and depict their products as benign and necessary. The ads feature borrowers testifying that they have used the loans 'responsibly." A narrator concludes by warning, "Reforming payday loans is fine. Banning them is not."

It’s important to note that the DC Council is technically not banning payday loans, but simply capping fees. Unfortunately, payday lenders are not the least bit interested in making loans that don't come with triple digit APRs and the power to hook people like a financial crack pipe. Payday lenders have for years been trying to break into the New York market, so look out for similar lobbying attempts in the Empire State.

Spitzer Disappoints
Using highly questionable reasoning, Governor Eliot Spitzer recently vetoed two bills that champion important consumer advocate causes. One bill prohibits credit card issuers from using what's known as "universal default," the practice of "raising a cardholder's interest rate or imposing a fee based solely on the reported delinquency of the cardholder on another creditor's account," according to the veto message itself. The other bill, among other things, would prohibit credit rating agencies from penalizing consumers for shopping for the best rate on a car loan or mortgage.

While these bills admittedly were quite limited in their practical effect on the practices they were designed to eliminate, they represented an attempt by New York legislators to send a strong reform message to the consumer credit industry.

The most troubling feature of these vetoes is that the language the Governor uses to explain his actions seemed to have been penned by the credit card and credit rating industries themselves. This was not what consumer advocates expected when they welcomed Spitzer to office.

Mark Winston Griffith: Author Bio | Other Posts
Posted at 7:57 AM, Aug 17, 2007 in Economic Opportunity
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