Gutierrez Proposes Weak Reform of Payday Lenders

By Mike Lillis
The Washington Independent

As congressional Democrats work to solidify finance industry reforms, a growing push to rein in payday lenders is running smack into a formidable barrier: the rising influence of the lenders themselves.

Not only has the industry stepped up its lobbying and political contributions in recent years, but it’s convinced at least one powerful Democrat — who just two years ago supported an outright ban on payday loans — that eliminating the practice is politically impossible.

As a result, Rep. Luis Gutierrez (D-Ill.), who heads the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, is pushing a loophole-riddled bill that would allow payday lenders to charge annual interest rates of nearly 400 percent — a proposal widely condemned by consumer advocates and some liberal Democrats, who want to put payday lenders out of business altogether.

Gutierrez wasn’t always so kind to the industry. In 2006, he supported the successful effort that effectively banned payday loans to members of the military by capping interest rates for those borrowers at 36 percent. (The cap was requested by the Defense Department, which called the loans predatory.) A year later, Gutierrez was a lead sponsor of the Payday Loan Reform Act, which would have prohibited the loans outright.

Gutierrez’s office did not respond to requests for comment. But in an interview with The Associated Press last week, the Illinois Democrat conceded that the growing influence of the payday lending industry contributed to his change of heart....(Click for remainder).