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Whither payday lending reform?

Under current law, Rhode Island's payday lenders can charge interest rates as high as 260 percent. That can leave low-income folk on a debt treadmill - taking out loans to pay off the interest on previous loans.

This year, advocates are pushing hard for a measure that would cap the interest rate payday lenders can charge at 36 percent - the top rate for other lenders in the state.

Sources tell Not for Nothing that advocates may emerge with a bill, but probably not in the form they'd like. Negotiations are underway right now. And payday lenders have a powerful lobbyist, former Speaker of the House William J. Murphy, in their corner.

Whether the lenders will accede to any kind of compromise is unclear. But there is talk, among other things, of phasing in the new rates; perhaps a payday loan company would be able to charge the full interest on a customer's first couple of loans and then be required to charge a lesser rate thereafter.

The approach would, in theory, provide a way for customers to get off the debt treadmill eventually. But they'd be putting in a lot of hard miles before then.

Advocates of capping the interest rate have their big State House lobbying day scheduled for tomorrow.

 

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