The payday-lending industry renewed its push yesterday to offer its services in Maryland, even as a Baltimore delegate, under fire from constituents, said he was withdrawing his sponsorship of legislation to allow the loans.
Del. Talmadge Branch, who heads the Legislative Black Caucus, said he would pull his name from the bill after hearing from hundreds of Baltimore residents who decried payday loans as legalized loan-sharking.
"If that's how they feel, that's what I'll do," said Branch, an East Baltimore Democrat.
Branch said he believes that payday lenders fill a role in poor communities, where residents have no ready access to banks, credit unions or other lenders.
For the second year in a row, representatives of the check-cashing industry made the same argument to the Senate Finance Committee yesterday.
"This is a way for a wage earner to use a very dignified alternative to meet a short-term financial problem," said American Joe Miedusiewski, a former state senator who lobbies for a coalition of payday lenders.
Payday lenders make short-term, high-interest loans by accepting postdated checks from people who borrow against their next paycheck. The fees charged can amount to an annual interest rate of 400 percent or more.
The General Assembly acted last year to ban such loans. But since then, an out-of-state bank has begun offering them through some outlets in Maryland.
The loans are legal under federal law, state officials said, so the Maryland statute does not prevent out-of-state lenders from offering them here. Even so, a national coalition of payday lenders has said its members won't offer the loans in Maryland unless the state law is changed.
Several lawmakers - and the state regulator who oversees consumer loans - said yesterday that they were frustrated that federal law allows such loans.
"If this bill goes into the code - and I'm not sure it will - it might be a bad law, but it's better than what we have now," said Sen. Thomas L. Bromwell, committee chairman.
The bill would limit the loan interest to 15 percent over the typical two-week payback period. In a key provision, lenders would be forbidden from interest "rollovers" that can cause customers to rack up enormous finance charges.
For example, a customer who has borrowed $200 would owe $230 at the end of the two weeks. With a rollover, that debt would rise to $260 and then $290 if the loan were extended for four more weeks.
Opponents of the bill said such protections are not enough.
Dayna Robertson, a 27-year- old Northeast Baltimore resident who once ran up more than $200 in interest payments on a $200 payday loan, said the proposed legislation is a bad idea, even with the ban on such rollovers.
It's still loan-sharking, she said.