Stephen Colbert Talks Payday Loans

Stephen Colbert goes off on payday reform and as a result,
payday lenders and consumers had the opportunity to share a laugh recently when Stephen Colbert devoted a segment of his show to the spineless congressional committee that is developing the Payday Reform Act. On April 14, 2009 Colbert highlighted the fact this legislation, introduced by Rep. Luis Gutierrez, falls far short of Gutierrez's previous goal of banning payday loans altogether.

In an April 1st Associated Press interview, Congressman Gutierrez said the payday loan companies are "very powerful. Their influence should not be underestimated." Now we know why, as Colbert points out, Gutierrez made the statement we just quoted. It seems that the top financial contributor to the Gutierrez re election campaign was a payday loan company! It appears consumers are safe from payday loan being banned by the federal government. If Congressman Gutierrez gets his way, there will be some better protections put in place to protect payday loan borrowers from any financial abuse at the hands of the payday loan companies.

In his statement on April 2, 2009, Rep. Gutierrez said,
"As our constituents are faced with even tougher economic conditions during this recession, they are more and more likely to turn to the services offered by the payday lending industry to pay for emergency car repairs, an unexpected doctor's bill and even groceries for their families. Many of these families have been ignored or shut out of the mainstream financial services industry and have nowhere else to turn for credit."

Rep. Gutierrez cites that states fall into 3 categories with regard to payday laws:
1.) states that have banned payday lending;
2.) states that have interest rate caps on payday lending up to 15% (391% APR);
3.) states that either lack interest rate caps on payday lending or have caps above 391% APR.

Gutierrez has set the goal of the committee to migrate states from category 3 to category 2. Some groups suggest that the committee should ban payday lending. However, the proposed law will result in states that still allow payday lending to have a maximum cap (391% APR).

It is ironic that Gutierrez is leading the charge to make it more difficult for consumers to access payday loans while at the same time he has accepted political contributions from payday loan lobbyists. "While they may not be JP Morgan Chase or Bank of America, they're very powerful. Their influence should not be underestimated," Conflicted indeed.

Payday loans fulfill a need for certain individuals and for now, services are valuable to help consumer find reputable payday lenders. Payday loans can be expensive but they fulfill a short term need and as Colbert joked, it's better than a loan from "the bank of shifty looking Armenian guy in a track suit."