Senator questioned because of donations
Sen. Tim Johnson
In a recent Associated Press story, Sen. Tim Johnson, of South Dakota, was listed as the highest recipient of campaign donations from the Online Lenders Association. Because this group includes many businesses that offer payday loans, reporters quickly tracked him down to hear is thoughts on an industry that some have deemed “predatory.”
Don’t run them out of the state
Rapid City Journal reports that Johnson, via his Communications Director Julianne Fisher, assures the public that his approach to payday loan legislation won’t be swayed by the donations. He says that certain lending practices do need oversight. However, he recognizes the need for payday loans and other short-term loans. He wants payday lenders to be able to continue doing business and providing a much-needed service.
In his own words
“It is important that truly predatory lending practices be rooted out, but it is also important that we do not enact laws and regulations that will unnecessarily restrict the offering of products and services, or borrowers’ access to credit,” Johnson said. “Were that to happen, people with poor credit histories would be forced to seek loans from completely unregulated lenders, loan sharks or other disreputable sources when they needed help paying a medical bill, affording an unexpected car repair or meeting some other unexpected cost.”
Why fight for payday loans?
Johnson’s fear that overregulation will make payday loans disappear altogether is warranted. In several states where payday loans were severely restricted, many companies were forced to shut down their businesses.
Last year New Hampshire passed an interest rate cap on payday loans. This year, the state’s biggest payday lender, Advance America, shut down all 24 stores in that state because they couldn’t afford business operations. The move put more than 50 employees out of a job.
A recent FDIC study says that in states where payday loans are unavailable, the average bank fees collected for overdrawn accounts are more than twice as high.
Oh yeah, any legislator that doesn’t automatically side against payday lenders is therefore an advocate for predatory lending. I know that Bank of America’s marketing department would like everyone to think so, because payday lending cuts into their profits off of overdraft protection.