Close lending loophole

Ripoff: Credit problems of the poor would be addressed by bill pending in the state senate.

March 26, 2001

STEP BY excruciating step, Maryland lawmakers are squeezing unscrupulous payday lenders out of the market.

The determination and stamina required to fight off wealthy opponents show the assembly at its best -- a portrait more often deserved than actually painted.

Until last year, poor borrowers accepted short-term loans at astronomical -- though legal -- interest rates. They accepted the terms because they needed to shop for their families or to pay their rent. With limited access to reasonable credit they often signed ruinous agreements.

But a law sponsored last year by Del. Elizabeth Bobo, a Howard County Democrat, allowed the state to clamp down on the worst of these practices. So-called fees were redefined to represent what they are: interest. Rolled over and redoubled when a desperate borrower was not able to repay on time, interest could reach 300 percent or more. The bill also limited the rate of interest that was legal for such loans in Maryland.

Yet, victory was not complete. At least one clever company now skirts the new law by serving as an agent for exempt out-of-state banks.

So, a loophole-closing measure sponsored by Del. Maggie McIntosh of Baltimore passed 138-0 in the House of Delegates last week. The bill makes the agent subject to Maryland's interest rate regulations.

Neighborhood groups such as Baltimoreans United In Leadership Development say the Bobo measure has had the desired effect -- but, once again, more is needed to complete the job.

This year's legislation calls for a study commission to explore ways of providing the credit resources poor people need. That work, too, must be undertaken with care lest the poor face ill treatment again.

Those who don't have adequate resources can't always make their issues compelling -- so legislators must be relied upon to do their jobs with determination and even passion. That seems to be happening here.

The senate should follow the house and pass HB 973 or a similar measure as soon as possible.

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