Barrier Against the Sharks

Today the state Assembly’s Banking and Finance Committee will vote on whether to limit the amount that payday lenders can charge on loans--a reduction that would still allow them an astounding annual interest rate of 150%. Even so, SB 898, sponsored by Sen. Don Perata (D-Alameda), should be approved because it’s a vast improvement over current rates, which now average 500%.

Lobbyists for the lucrative payday loan industry say the Perata bill would drive them out of business. In fact, the cap, which would amount to $37.88 on a $100 loan over three months, is three times more generous than the $10.28 cap that small lenders like Household Financial must stay within and 10 times higher than the cap applied to credit unions. Payday companies lend people $100 or so against their next weekly paycheck and take in exchange a postdated check for perhaps $115. Such loans often trap the working poor in cycles of high-interest debt.

Five members of the 11-member committee say they support the bill, but it needs six votes to pass. The votes of two local legislators--Assemblymen Carl Washington (D-Paramount) and Ed Chavez (D-La Puente)--could prove decisive. Last month, Washington and Chavez voted for an industry-friendly “reform” bill that would have done little to rein in loan sharks. The industry bill died soon after the last vote, and now Perata is ardently seeking the legislators’ support.

They should heartily grant it. Both Washington, who has backed economic empowerment zones for low-income districts like his own, and Chavez, the son of a steelworker and the first in his family to attend college, campaigned as champions of the underdog. By voting for SB 898 today, they can fulfill their promises by helping to curb a practice that traps people in poverty.

To Take Action: Assemblyman Carl Washington, (916) 319-2052. Assemblyman Ed Chavez (916) 319-2057. On the Web, go to https:// democrats.assembly.ca.gov/members and click on member’s name.