With one month left until Maryland's General Assembly convenes, the state's largest citizens group declared war on check-cashing operations yesterday, calling for them to be regulated.
Baltimoreans United in Leadership Development (BUILD) yesterday introduced several state legislators who have agreed to sponsor a bill that would ban "payday loans" allowing consumers to borrow from future paychecks at interest rates of as much as 26 percent.
BUILD recently obtained a legal opinion from state Attorney General J. Joseph Curran, who called the loans illegal because they exceed state loan standards. Check-cashing industry leaders counter that the charges are "fees" and not interest.
BUILD, the workers' rights group that successfully pushed for living-wage legislation, vowed to help create state rules governing check-cashing. "We are going to fight every step of the way until you stop preying on the poor," said Pat Alston, of the organization's Solidarity Sponsoring Committee. "We are not afraid of your lobbyists or your lawyers."
Maryland would join 22 states and the District of Columbia in regulating the payday loans. Several states, including Virginia, have won court cases against check cashers, arguing that interest on the loans can reach as much as 500 percent when calculated annually.
The check-cashing industry is one of the nation's fastest-growing businesses, with revenue for some companies increasing almost ten-fold in the last decade. Maryland check-cashers oppose the legislation, saying that they provide a needed service in poor neighborhoods where banks won't do business.
"It fills a tremendous void in the financial world in communities that are not served by bank branches," said Brian I. Satisky, head of the Maryland Association of Financial Services Center Inc.
In addition to check-cashing, the businesses help consumers obtain money orders and pay utility bills, helping thousands of Marylanders manage their money, Satisky said. "It's a one-stop financial shop," he said.
Under the payday loan, someone who needs $300 can get it by writing a postdated check for $379. Customers can roll over the loans, which causes many to get into financial trouble.
Patrick Griffin, a 31-year-old recovering drug addict, told fellow BUILD members about paying $1,000 in interest from two payday loans. "It is expensive to be poor in this town," Griffin said.
State Del. Elizabeth Bobo, a Howard County Democrat, joined state Del. Michael Dobson, a Baltimore Democrat, in pledging to introduce a bill that would cap check-cashing fees at 2 percent for government checks and 3 percent for others. The two delegates, members of the House Commerce and Government Matters Committee, introduced a similar measure last year that failed to make it to a vote.
With Curran's opinion and the backing of BUILD, Bobo said, the chances for passage this year are better.
"It's unconscionable to allow people to be gouged the way they are being gouged in this state," Bobo said. "The people who can least afford to pay are paying the most."
BUILD has scheduled meetings with three banks to discuss creating basic accounts that would allow the poor access to financial institutions without the deposit limits.
"Where there is no line of affordable credit," Bishop Douglas Miles of BUILD said, "BUILD will draw the line of accountability."