Payday loans really just loan sharking

Matthew Glans' recent letter ("Payday loan bill is regulatory overkill," July 23) omitted key information about short-term payday loans.

These products are nothing more than legalized loan sharking.

Sen. Durbin's proposed legislation to cap the interest rate on these loans at 36 percent would protect consumers from predatory and irresponsible lenders.

While at first glance, a payday loan appears to be a short-term loan that is easy to repay, these loan schemes tie borrowers to interest rates of 400 percent and more.

Payment in full is required on payday and the lender holds the borrower's personal check as collateral.

Since the typical cash-poor borrower can't afford to repay on such a short time frame, one loan leads to another so-called short-term loan and sets them up for long-term debt.

According to CRL's research, borrowers who receive five or more loans a year account for 90 percent of the lenders' business.

Predatory lending is damaging our economy and threatening the stability of families throughout the nation.

The Center for Responsibility's studies show that cash-strapped families lose $4.2 billion each year in fees that go to predatory lenders who rely on trapping them in debt.

Sen. Durbin's effort to protect consumers and reward responsible lenders is crucial to helping struggling families and to returning our economy to a healthy state.

Debbie Goldstein

Executive Vice President

Center for Responsible Lending

Durham, NC