Rob Horowitz: End Legal Loan-Sharking Now

Rob Horowitz: End Legal Loan-Sharking Now

Payday lenders -- lenders who provide short-term loans to tide people over until their next payday -- have become legalized loan sharks in Rhode Island. Preying on our most vulnerable citizens, these lenders can charge up to 260 percent interest, forcing borrowers into an endless cycle of debt as they take out loan after loan to pay off the interest incurred on the previous loan.

Legislation (S-2307, H-7257) introduced last week by Sen. Juan Pichardo (D- Dist. 2, Providence) and Rep. Frank Ferri (D-22, Warwick), would end that practice by closing a loophole in the state usury laws and subjecting payday lenders to the same 36% annual maximum interest rate that applies to all other lenders in the state.

While similar legislation died in the General Assembly last year, the prospects for success seem better this year. A majority of General Assembly members are already on board as co-sponsors and a broad coalition of organizations back the bill.

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Still, opposition from the well-financed payday lending industry will once again be fierce and they will spare no expense in their efforts. For example, former House Speaker William Murphy, an effective advocate with still strong relationships with Rhode Island legislators, has been tapped by one of the largest payday lenders in the nation, Advance America, to lead the effort to block this legislation. As a consultant to Advance America, Murphy played a significant strategic role in killing the bill last year, despite the fact that he was barred from lobbying under the rule that bans legislators from lobbying the General Assembly for a year after they depart. This year, he is free to lobby his former colleagues and will be even more active on behalf of his payday lending client.

General Assembly leaders must do the right thing this time and put the legislation to close payday lending up for a vote. It is long past time to end legal loan sharking in our state.