D.C. Payday Lenders Unbowed Ahead of Vote

Payday lenders urging the D.C. Council to reject a measure today that would limit their fees have persuaded customers to send hundreds of e-mails and letters pleading for the council to reverse its initial support of the legislation.

In recent weeks, the industry has also sought to become more visible by sponsoring an event for high school students and giving a $100,000 contribution to a Southeast nonprofit organization to help expand a program for minority business owners.

Payday lenders say the annual percentage rate allowed in the measure would add up to 92 cents per $100 borrowed, not enough for the city's 48 stores to continue operating. Payday lenders currently can charge up to $16.11 per $100 and tack on fees and more interest if the borrower does not repay the loan.

In July, the council gave preliminary approval to the bill in a 12 to 0 vote despite pleas by council member Marion Barry (D-Ward 8) to delay the vote and consider alternatives to capping the percentage rate.

Such a lopsided vote usually would dissuade the losing side, but the payday lending industry is not giving up. "I've received I don't know how many e-mails and how many letters," said council member Kwame R. Brown (D-At Large). "I thought it was over. I see a 12-nothing vote again."

Lyndsey Medsker, a spokeswoman for the Community Financial Services Association, said the group opposes the measure, which it believes is effectively a ban on an industry that does about 700,000 transactions a year in the District.

The group wants the council to remove the 24 percent cap on interest but favors limiting the number of times that customers can extend loans and establishing an extended payment plan for borrowers who do not repay their loans within two weeks. Barry, who co-sponsored the legislation, said he did not know whether he would propose such alternatives today in the form of amendments.

Said Medsker: "On a national level, no state legislature has ever really considered banning the industry. This year, there were bills proposed, but nothing ever made it out of committee."

A month ago, the payday lending industry began its hard-hitting campaign with commercials on television and radio and in newspapers. In the ads, customers speak highly of the loans that helped them get through emergencies, in contrast to the former customers who spoke to council members at a hearing in June about getting trapped in a cycle of debt.

The industry also launched an e-mail crusade, encouraging customers to log on to a Web site and send e-mails with this message: "I support reforming the payday lending industry, but I do not support eliminating it. As a citizen of the District of Columbia, I urge you to support consumer access to short-term credit."

Some council members wondered why they received e-mails from the same address on Pennsylvania Avenue SE. It was the location of one of the stores. Medsker said customers were entering the store's address instead of their home addresses but said every e-mail was from a different person.

The Center for Responsible Lending and council member Mary M. Cheh (D-Ward 3), who also sponsored the measure, have countered the industry with data showing that borrowers generally stay in debt. Three former employees of Check 'n Go, which has 16 stores in the District, said at a news conference last week that company policies trapped customers into loans they could not afford.